Oil Monitor as of 22 December 2020

Date published: December 22, 2020

WORLD OIL PRICES (December 14-18, 2020 trading days)

Dubai crude has increased week-on-week by almost US$2.00/bbl. MOPS gasoline rose along with MOPS diesel by around US$2.30 per barrel.

Reasons for the Adjustment

  • The US-EIA Short-term Energy outlook remains subject to heightened levels of uncertainty as responses to COVID-19 continue to evolve. It sees supply and demand pattern in 2020 to continue to affect the patterns in the future.1
    • Global consumption of petroleum and liquid fuels is seen to average at 95.4 million barrels per day (MMB/D) in 2020, down by 8.8 MMB/D from 2019 before increasing by 5.8 MMB/D in 2021.
    • OPEC crude production is projected by the US-EIA to average 27.5 MMBD in 2021, up from estimated 25.6 MMBD in 2020. This reportedly reflects OPEC’s announced potential increases to output targets (staggered starting January to April) and production increases by OPEC-member Libya.
    • Thus, the EIA sees Brent prices at average US$49/bbl in 2021. The 1st quarter 2021 is forecast to average at US$47/bbl, about US$3/bbl higher than the 4th quarter of 2020; and will further increase to US$50/bbl in last quarter of 2021. The higher forecasts for higher crude prices in Q1 2021 reflect EIA’s expectation that while inventories will remain high, they will decline with rising global oil demand and restrained OPEC+ oil production.
  • Analysts still see substantial headwinds2 for global demand that could lead to a correction in the near term despite the optimism generated by the OPEC+ deal and COVID-19 vaccinations that lifted prices above $50/b during week. Platts noted that demand challenges are most evidenced by continued weak refining margins in Asia; Singapore cracking refinery margins (vs. Dubai) as computed by Platts remains rooted in the negative territory.
    • Petron announced suspension of its 180,000 b/d Bataan refinery operation in mid-January due to poor refining margins.
    • Australia’s BP Kwinana refinery (140,000 b/d) is to shut sometime in early 2021. This adds to the country’s refining capacity to total decline of 58% in a decade. Australia’s refining sector has seen long-term difficulties due to a lack of competitiveness against larger, more complex regional refineries.

  • For gasoline, the week ended in the Asian market at bullish momentum behind another surge in the US gasoline vs. Brent crude crack spread that lifted cracks in Asia's gasoline fuel complex. The surge in US gasoline/Brent crack was due to positive developments in the West, as the US Food and Drug Administration advisory endorsed the Moderna vaccine on Dec. 17, thereby ensuring that a second COVID-19 vaccine will soon be available.

  • For Singapore gasoil/diesel, cracks were stable and consolidated recent gains. After plunging to under $2/bbl in late-September, cracks have seen a slow but steady recovery to almost $6/bbl. The recovery has been mostly a result of supply curtailments by refiners, particularly amongst major gasoil exporters.
    • Platts Analytics projects Asian refinery runs in December at 1.75 MMB/D below year-ago levels, implying a reduction of about 700,000 b/d of middle distillate output. The largest cuts to runs are in Japan, Taiwan, South Korea, and India.
    • The resurgence of COVID-19 infections in Japan and South Korea however brings renewed concerns over demand in Asia.
    • Gasoil/Dubai crude cracks is expected to continue to improve, albeit at a moderate pace.

 

FOREX: Philippine peso appreciated week-on-week against the US dollar by P0.02 to P48.06 from P48.07 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

The oil companies implemented their price increase effective today, 22 December 2020. Gasoline increased by P0.75 per liter, diesel by P0.85 per liter and P0.80 per liter increase for kerosene.

These resulted to the year-to-date adjustments to stand at a net decrease of P1.97/liter for gasoline, P5.91/liter for diesel and P9.24/liter for kerosene.

For the updated prevailing retail pump price, please browse this link: https://www.doe.gov.ph/price-monitoring-charts?q=retail-pump-prices-metro-manila.

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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 US-EIA Short-Term Energy Outlook, 08 December 2020
2 HEADWINDS: It’s a jargon for the external unannounced difficulties/challenges that a business may face, like upward revision of taxes, fuel prices etc. When the growth is very smooth and earning, the situation is called as tailwind; otherwise, when the business is down and profit is going down, the situation becomes headwind.

 

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