Oil Prices Jump Again, Approach $42 Level

The price of West Texas Intermediate (WTI) crude oil, which had fallen below $40 per barrel, climbed to its highest ever mark again, jumping the international oil price. Due to this increase, the KOSPI (Korea Composite Stock Price Index) collapsed to the 780-point level.

According to the Korea National Oil Corporation yesterday, the spot and futures prices for May 24 (July delivery) each rose by $1.79 from the day before and stood at $41.78 and $41.72 per barrel respectively, replacing the previous high.

The spot price for Brent crude increased by $1.39 to $38.84 per barrel, and futures (July delivery) rose by $1.66, closing the market at $38.17.

The rise in the international oil price was interpreted to have been due to OPEC’s informal conference held in Amsterdam, which ended without much of an outcome, and other countries of OPEC showing reserved views to Saudi Arabia’s boost in oil production.

Chakib Khelil, Energy and Mines Minister of Algeria said on May 24, “OPEC is currently producing 3 million barrels more than its oil production quota, and we cannot expect a drop in the oil prices even if the limits are increased.”

Five Asian countries, Korea, China, Japan, India and the Philippines, agreed to establish working-level conferences between their governments to cope with the high oil price situation.

As the news of the oil price increase acted as an unfavorable influence on investors, KOSPI closed the market at 784.06 yesterday, dropping by 15.58 points (1.95 percent) from the day before.

Individual and foreign investors’ net purchases (subtracting the amount bought from the amount sold) totaled 28.4 and 146 billion won respectively, while local institutions sold some 170 billion won worth of shares.

Samsung Electronics slumped by 3.72 percent (19,000 won) and closed at 492,000 won, being pushed down below the 500,000 won level in four days.

Kang-Woon Lee kwoon90@donga.com