- The global oil market may be close to an inflection point. Global oil consumption is starting to recover, especially with the accelerated vaccination schedules of developed countries. Meanwhile, supply recovery could be slower, as OPEC+ (including Russia) production cuts continued (based on March meeting).
- The increase in oil prices is estimated to be short-term, for the next 1-2 years. The problem is, the next 1–2-year period will be a challenging phase for Indonesia, where there is the potential for premature heating (the economy has not recovered 100%, but inflation and CAD have risen more rapidly).
- The effect on inflation may be limited, but SOEs in the energy sector could suffer losses. In the end, this has the potential to increase the fiscal burden on the Government.
- The increase in oil prices is expected to widen Indonesia's CAD to more than 2% of the Gross Domestic Product (GDP). This is one of the factors that will depress the Rupiah in the short term.
- Best-case scenario to curb the increase in oil prices is the OPEC + policy to limit supply cuts after the April meeting.
