State-owned oil giant Pertamina's refinery unit IV in Cilacap, Central Java. Photo: Reuters/Darren Whiteside
State-owned oil giant Pertamina's refinery unit IV in Cilacap, Central Java. Photo: Facebook

The surprise decision by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by 1.2 million barrels is positive for Asia’s exporting countries, such as Malaysia, Indonesia, Brunei and Myanmar, according to a report.

The agreement send the price of Brent crude, the international benchmark for oil prices, up 13% to above US$52 a barrel in Thursday trading.

Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight, said in an emailed note that while the move will be negative for oil importing countries — including Japan, China, South Korea, Thailand, the Philippines and India — the overall negative impact is expected to be relatively modest.

“The Asian countries that are relatively dependent on oil imports, such as India and Sri Lanka, are most vulnerable to higher oil prices due to the high share of oil in their total import bill,” he said.

Industries for which oil comprises a significant proportion of input costs, such as airlines and road transportation companies, will face greater negative impact effects, he added.

However, he said a price hike needs to be seen within the overall context of world oil price changes since 2014. Even if Brent crude averages US$52 in 2017, this would still be less than half the price of oil at the beginning of 2014, he said.

The OPEC countries agreed on Wednesday to cut oil output for the first time since 2008. The deal included the group’s first coordinated action with non-OPEC member Russia in 15 years.

“OPEC has agreed to an historic production cut,” said analysts at AB Bernstein, Reuters reports. “The cut of 1.2 million barrels per day (bpd) was at the upper end of expectations (0.7-1.2 million bpd). An additional cut of 0.6 million bpd from non-OPEC countries could significantly add to what has been announced by OPEC.”