KUALA LUMPUR, Oct 13 (Bernama) -- Trading speculation of crude oil is expected to slide following difficulties in getting funds from financial institutions due to the financial meltdown, Malaysia Airlines managing director Datuk Seri Idris Jala said. Jala, who expects the price of crude oil to be between US$80 and US$120 per barrel in the next 12 months, said this at the Routes Forum 2008 in a session on "Living with High Oil Prices". He said that layers of hedges had taken place in the past 13 months well beyond the realistic price of crude oil, when in fact there was no shortage of oil and gas. "When it is said that there are no excess inventory, this gives a lot of opportunity for speculators to come in on the back of 'geopolitical fears'. A lot of geopolitical fears have disrupted supply such as in Nigeria and Iran," Jala said. "There may be a shortage, so they say you better take up hedges to protect yourselves. Before long it is the herd mentality," he said. Jala said futures trading for crude oil was at present most heavily traded. "There is room for trading but when it is derailed from the supply and demand, that is the problem," he said. He said if crude oil hovers at US$100 per barrel, it was still constituting about 50 percent of the airline's cost. "That is a lot of money. Therefore, we have to attack the cost," he said, adding that a there was a lack of discipline in airlines to manage cost efficiently. "The day we make money, we go over the top in having excess capacity," he added. Jala said airlines have to bring down all other costs and pass on some of it in order to post profits and returns acceptable from the shareholders' point of view. "We must allow for more consolidations for better returns," he said.

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