WORLD OIL PRICES (January 25-29, 2021 trading days)

Reasons for the Adjustment

• Among Asian economies, India is expected to be the frontrunner to sustain demand for Middle East crude as Asian economies continue to deal with fresh virus outbreaks, crushing anew consumption and oil imports slump.
  • India's oil demand remained largely stable and is expected to buy more than China.
  • Chinese crude demand appears to have receded with the new COVID-19 restrictions set to dampen travel over the Lunar New Year holiday season.
    • Premiums for Russia ESPO, a key indicator for China’s independent sector, dropped to three-month lows after a strong start this year.

• Numerous Asian refiners saw cuts of 10-15% to their February allocations, prompting increased spot market demand in recent weeks. But with regional refining margins still weak and the spring maintenance period looming, crude demand is likely to be muted.

• On supply, Saudi Arabia remain committed to its reduced production, down by 1 million b/d (MMB/D) through February and March. But crude grades from the US, West Africa, Europe and other Western regions continue to be an optimal choice for Asian economies on the back of economic viability bolstered by cheap freight.

• Asian gasoline cracks saw some uplift from a strengthening US market as US inventory, at 13.5 million barrels, was lower than a year ago - prior to the pandemic demand collapse. US gasoline demand is estimated to be 10% down year-on-year at 8.07 MMB/D, but supply is curtailed due to low refinery runs.
  • Asian market was being weighed down by recent COVID-19 pressures on demand emerging in Indonesia, Malaysia, Japan, and China.
  • Notably, Indonesia’s gasoline imports are expected to fall to around 8 million barrels in February as the country grapples with rising COVID-19 infection rates and new restrictions.
  • However, Asian gasoline market will see more support from tighter supply as spring refinery maintenance draws closer, and the impending permanent closure of BP Kwinana (140,000 b/d) in Australia and the planned four months economic shutdown at Petron Bataan (180,000 b/d).

• Gasoil/diesel had little change during the week. Analysts see prices to be relatively stable as there are no signs of any shift in fundamentals between renewed demand fears due to COVID-19 resurgence in several Asian countries and supply reductions owing to low refinery runs.
  • Singapore stock levels have been boosted by inflows from India and the Middle East due to unfavourable arbitrage¹

• Looking forward on crude, Platts see Dated Brent, the widely-used crude oil benchmark, to stay below $55/b in Q1, but reach $59/b in Q3. It will back down to $55/b by end-2021.

FOREX: Philippine peso depreciated week-on-week against the US dollar by P0.02 to P48.08 from P48.06 in previous week.

Other recommended reference sites:
    • http://www.aip.com.au/pricing
    • http://www.indexmundi.com/commodities/?commodity=crude-oil-dubai
    • https://www.quandl.com/data/ODA/POILDUB_USD-Dubai-Crude-Oil-Price

DOMESTIC OIL PRICES

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For more information, call the

Department of Energy
Pricing: 840-2187
LPG: 840-2130
Fuels: 840-5669
SMS: (0915) 4469421
Email: oilmonitor@doe.gov.ph
Website: https://www.doe.gov.ph

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¹  Arbitrage occurs when a security is purchased in one market and simultaneously sold in another market, for a higher price. The temporary price difference of the same asset between the two markets lets traders lock in profits (By
Investopedia)