Vice finance minister says global oil prices to see limited rise

It is unlikely that global oil prices will rise further, South Korea’s first vice minister of finance said Friday, citing the supply capacity of major oil producers as well as the recent surge in US Treasury bond yields.

“Prices of the country’s benchmark Dubai crude, which stood at $42 per barrel last year, surged to more than $60 per barrel this month,” said Vice Finance Minister Kim Yong-beom during an economic meeting.

“Oil prices, however, are less likely to soar further, due to leading oil-producing nations’ sufficient capacity to increase oil supply as well as a continued rise in US Treasury yields.”

Kim’s remarks came after a report from the Korea Energy Economics Institute predicted that Dubai crude prices would rise further, referring to a recent agreement among oil producers in the Organization of the Petroleum Exporting Countries Plus to keep production steady through April. But oil prices will see a mild increase as OPEC+ holds oil stockpiles due to slowing global demand in the continuing pandemic, it said.

Also, the 10-year US Treasury yield has been on a steady rise, having reached 1.74 percent Thursday, the highest gain since January 2020, data showed. Treasury yields are paid by the US government as interest on the bonds. A prolonged rise in US Treasury yields normally drags down asset prices, officials said. 

“Rising oil prices could pose financial burdens on households and companies. However, growing global demand in the wake of vaccine developments has triggered the current hike in oil prices. Therefore, its negative impact will be offset once the country’s exports recover further,” Kim said. 

Meanwhile, recent hikes in oil prices have spawned concerns that inflation may pick up amid an economic slowdown.

The consumer price index rose 1.1 percent on-year in February, compared with a 0.6 percent on-year gain the previous month, according to data from Statistics Korea.

The government will seek to stabilize public utility fees in the second quarter to minimize their impact on consumer prices, Kim added. 

By Choi Jae-hee (cjh@heraldcorp.com)