Energy Minister Purnomo Yusgiantoro announced today (Wednesday) that he would sign a decree officially withdrawing Indonesia from OPEC when its membership expires at the end of 2008.

A member since 1962, Indonesia’s exports have been waning for years due to aging oil wells and a lack of infrastructure investment by the government. Oil production is down 49% from its 1977 peak. The country has now become a net importer of oil, Purnomo said.

“If production comes back to give us the status of net oil exporter then we can go back to OPEC,” Purnomo said, speaking before the Jakarta Foreign Correspondents Club today, Bloomberg News reported.

Indonesia’s withdrawal from OPEC will help the Asian nation save an estimated $3.1 million (2 million euros) in membership fees per year, Purnomo noted.

The country has more than 4 billion barrel in proven reserves, according to the AFP. However, Indonesia’s production has been dropping steadily since 1995. So while other OPEC member nations have been benefiting from high oil prices, Indonesia has suffered as it has been forced to import oil.

“If OPEC had more solidarity with its members and helped those like us who are suffering from the current high prices, it would have been a different matter,” Indonesia’s Parliament energy committee chairman Agusman Effendi told the AFP.

Indonesia’s daily oil output has fallen to 927,000 barrels per day (bpd) this year, down from 950,000 barrels a day in 2007. Its daily output falls short of the nation’s daily consumption of approximately 1.2 to 1.3 million barrels per day, according to Reuters UK.

The Indonesian government heavily subsidizes retail oil sales to the tune of almost $13 million per year. But due to rising costs, the government has had to enact unpopular fuel price increases, which have sparked civilian protests.

Oil’s Bubbling Higher

Oil reached a record high of $135 per barrel on May 22, but since then the price has dropped.

Oil prices have been volatile today. At 1:48 p.m., oil for July delivery was trading at $131.28 a barrel on the New York Mercantile Exchange. Earlier, however, crude oil traded down as low as $125.96 today, according to Bloomberg data.

But the slight reprieve we’re currently experiencing is likely to reverse itself just as quickly as we head into the summer driving season and speculators continue to drive up the price of “black gold.”

Both Goldman Sachs Group Inc. (GS) and JP Morgan Chase & Co. (JPM) recently released reports that have oil soaring over $200 a barrel within the next two years.

Money Morning Investment Director Keith Fitz-Gerald – one of the first investment gurus to predict triple-digit oil prices – has boosted his own target, suggesting that oil could go as high as $225 a barrel.

“The math is really simple here,” Fitz-Gerald said in a recent e-mail interview from China. “We are burning through supplies at a rate that’s four times to five times faster than we’re discovering new reserves. Throw in a few [surprises]… perhaps a terrorist event… and add in the accelerating use of oil and gasoline in Third World countries, and we have the recipe for far higher prices.”

Source: Indonesia to Withdraw from OPEC Due to High Oil Prices

However, during a visit with Saudi Arabia’s King Abdullah U.S. President George W. Bush was able to convince the world’s leading oil exporter to increase its output.

Light sweet crude for June delivery jumped $3.31 a barrel, or 2.7%, to reach $127.43 in electronic trading on the New York Mercantile Exchange. Oil prices have now soared 103% in the past 12 months.

The jump was largely attributable to a new prediction from investment-banking giant Goldman Sachs, which raised its price forecast for the second half of the year to $141 a barrel. Goldman Sachs analysts had previously quoted a price of $107 a barrel.

“Supply constraints continue to push crude prices higher,” Goldman analysts wrote in a research note Friday. “The dire macroeconomic impact from the current oil shock has yet to materialize.”

This is the second time in as many weeks that a Goldman Sachs oil-price prediction has ignited a trading tempest in the crude-oil markets. Goldman Sachs, JP Morgan Chase & Co. (JPM) and CIBC World Markets Inc. each recently put forth scenarios that have oil surging over $200 a barrel in the next two years, as soaring gas prices and wary U.S. consumers have failed to put a significant dent in oil demand.

In their report, CIBC analysts actually predicted that gasoline would reach $7 a gallon within four years as oil prices surged to $200 a barrel.

However, Money Morning Investment Director Keith Fitz-Gerald – a longtime energy bull – has actually gone a step further suggesting prices will spike as high as $225 a barrel.

That projection represents a revision from a market call he made in December, when crude prices were in the $90-a-barrel range: At that time, Fitz-Gerald caused a stir when he predicted that oil prices were headed for $187 a barrel. He reiterated that prediction back in early March – just before the investment-banking crowd started making their hefty forecasts for oil and gasoline.

“The math is really simple here,” Fitz-Gerald said in an e-mail interview from China, where he was heading an investment-research tour. “We are burning through supplies at a rate that’s four times to five times faster than we’re discovering new reserves. Throw in a few [surprises] … perhaps a terrorist event …and add in the accelerating use of oil and gasoline in Third World countries, and we have the recipe for far higher prices. That’s already in the oven.”

In addition to the proprietary strategy he uses to project market prices, Fitz-Gerald said he relied on some of the observations he’s been making as part of the investor trip he’s leading through China.

After all, with all the bustle and development taking place in that country, all it takes is for one to stroll down the street to see that the demand for oil and gasoline is going to increase far faster than most analysts would ever believe.

“Nowhere is that more evident than China where I’m traveling now,” Fitz-Gerald said last week in an e-mail from Mainland China’s capital. “Beijing alone is adding 14,000 vehicles a day (1,500 of which are just cars). Across China, the number is obviously higher. [The] same [is true] in India, but I don’t have the figures at my fingertips. Then there’s the other side … evidence suggests that OPEC reserve figures may be artificially high. Imagine what’s going to happen when people figure out that there really isn’t as much oil as everybody thinks. $225.21 is not out of the question … after we get to $187.”

Famed investor Jim Rogers shares Fitz-Gerald’s belief that the Organization of Petroleum Exporting Countries (OPEC) may be guilty of some subterfuge in reporting its reserves.
“Saudi Arabia has announced for 20 years in a row that they have 260 billion barrels of oil in reserve,” Rogers recently told Money Morning during an exclusive interview in Singapore, where he now makes his home. “It’s astonishing. The figure never goes up and it never goes down. They have produced dozens of millions – billions – of dollars of oil in that period of time.
“If you go to Saudi Arabia you have to wonder: ‘How could this be? How could it be that every year for 20 years in a row, you always have 260 billion barrels of oil in reserve?’ The Saudis say: ‘You either believe us or you don’t.”And that’s the end of the conversation.”

Saudi Arabia Changes Its Tune

OPEC nations have routinely resisted calls to increase output, insisting that investor speculation has hijacked the market and high oil prices have nothing to do with demand, which they see declining as the U.S. economy continues to slow. OPEC, which pumps more than 40% of the world’s oil, has kept output targets unchanged during its past three meetings, on March 5, Feb. 1, and Dec. 5.

In fact, in its Monthly Oil Market Report for May, the cartel said global demand for oil would grow at a significantly slower rate than previously forecast. World oil demand will rise by 1.16 million barrels per day (bpd) – 40,000 barrels per day less than previously predicted.

However, OPEC analysts also acknowledged that non-member nations would produce less oil than originally thought, and after President Bush met with King Abdullah Friday, there was a sudden reversal of fortune.

Late Friday, Saudi Oil Minister Ali al- Naimi said the country would raise output by 300,000 barrels a day to 9.45 million barrels a day in June, Bloomberg Newsreported.

“On May 10 we increased our response to our customers by 300,000 barrels because they asked for it,” al-Naimi said. “So our production for June will be 9.45 million barrels per day. This is the request of about 50 customers worldwide.”

In its monthly report, OPEC said its production fell by about 390,000 barrels a day in April, mostly due to violence in Nigeria. The same report said Saudi Arabia’s April production was 9.02 million barrels a day, down 37,000 barrels a day from a month earlier.

The increase comes as gas prices climbed to historic highs, drawing the ire of many U.S. politicians. It so happens that Saudi Arabia has a number of deals on the docket with the United States that risk interference should high oil prices persist.

You can hardly find a seat at the best restaurants in the capital, Caracas, these days. They’re always packed… the art galleries are rammed … and the whisky importers have never had it so good. ..

Out on the streets there are so many luxury 4×4s on the road you could almost be in Chelsea! No doubt about it, Venezuela’s economy is booming.

And I’d like to show you how to position yourself to profit from it!

My next Profit Hunter recommendation is a clever way serious investors could profit from this boom.

More on that in a moment. First, let me explain why Venezuela is the fastest growing major economy in Latin America…

Why I believe the boom has a long, long way to go

It grew by 8% last year and 10.3% in each of the two years before… and by 18.4% the year before that…

That’s the kind of growth you can expect when you are the world’s sixth biggest oil exporter and the price of oil just keeps hitting new highs.

Here at Profit Hunter, I’ve long emphasised we are now in the era of $100 oil. And in fact, by some measures, Venezuela is sitting on top of more oil than Saudi Arabia.

It’s just one reason why the boom in Venezuela still has a long, way to go.

You see, it isn’t just a small group of people who are benefiting from all this new money. According to the IMF, the average Venezuelan should have an income of $10,169 this year. That’s up from $5,427 just three years ago. And it makes them richer than the Brazilians, the Argentineans, the Chileans and the Mexicans – the countries that get all the attention from international investors.

Venezuela ’s share market offers good value as well…

The Venezuela Stock Exchange Index is trading at a price to earnings ratio of less than five and it’s yielding about 9%. Yet most of the big international investors have been afraid of going in!

Of course you can’t blame them. The international media has been focussed on Chavez’s nationalisation of some of the big foreign-owned companies’ assets in the country.

But the truth is Chavez hasn’t been as bad for business as he sounds. The signs of new money that you see everywhere don’t quite gel with Chavez’s socialist rhetoric.

Just listen to his former chief of staff, retired general Alberto Rojas…

In an interview with The Economist last year Rojas explained that “some of Chávez’s speeches are for the gallery… and I’ll give you an example: the attack on the bourgeoisie.”

Chavez may have declared that being rich is bad, but Rojas pointed out that banks, “the most extreme expression of the bourgeoisie”, have actually been “the most favoured sector” of the economy since Chávez swept into power in 1999.

So much for all his bombast about the need for “petroleum socialism”!

A real undervalued gem

Don’t get me wrong though…

Venezuela isn’t some paragon of capitalism waiting to be discovered by intrepid investors. A lot of the new money has ended up with people with close political connections to the regime. They call them the “boligarchs” after Chavez’s “Bolivarian Revolution”, which named for the country’s independence hero .

But there IS good money to be made in Venezuela if you know what you’re doing.

And the exclusive report I’m preparing for Profit Hunter members reveals a groundbreaking company that knows EXACTLY what it’s doing.

It’s a real undervalued gem that’s slipped under-the-radar of the wider investment community.

If you’d like to take trial membership to my service you’ll see that this company hasn’t put all its eggs in one basket. It has big operations in Venezuela and its profiting from its growing wealth. But it operates in other fast growing markets as well.

I’m working on this report right now, but all the details will be with members very soon. So if you’d like to sign-up, click here now. You’ll get another great opportunity to act on right away on doing.

The money really is flowing east. Now’s the time to act!

Regards,

Manraaj Singh
Editor Profit Hunter