WORLD OIL PRICES (August 17-21, 2020 trading days)

Reasons for the Adjustment

• The first Asian refinery closure directly attributable to COVID-19 has renewed focus on other potential shutdowns in the region. Pilipinas Shell Petroleum Corp. (PSPC) announced it would permanently end operations at its Tabangao refinery and convert the site to an import terminal.
• The slump caused by COVID-19 could be the tipping point for other refineries of a similar profile in mature markets:
  • New Zealand's Refining NZ has signalled it plans to convert its 135,000 b/d Marsden Point, the sole refinery of the country, into import terminal in the near future.
  • Australia’s Viva Energy will review the long-term viability of its 120,000b/d Geelong refinery.
  • Japan’s largest refiner ENEOS will shut the 115,000 b/d Osaka refinery from October 2020.
• Further closures may not come immediately but emerge in a gradual fashion over the next 12-24 months as the financial losses caused by the slump in demand and margins play out fully.  Such closures would not impact the long-term outlook for Asian crude demand, and will allow stronger export-oriented refiners such as those in India, Korea, Singapore, and China to seize additional market share. But in the near term, it highlights an uneven demand recovery and continued downside risks for crude prices through the remainder of 2020.¹
• A key monitoring committee co-chaired by Saudi Arabia and Russia met online last August 19, exhorting all members to adhere to their commitments to speed the market's rebalancing from the COVID-19 collapse.
• The OPEC+ alliance in May implemented the largest coordinated production cut in the oil market's history at 9.7 million b/d (MMB/D) - about 10% of pre-pandemic demand.
• Prices have stabilized around $45/bbl in recent weeks, and the coalition has eased its cuts to 7.7 MMB/D from August through the end of the year, in anticipation of higher demand.
• The Asian gasoline market received fresh support from the West, as another spike in the US RBOB/Brent crack helped push regional crack spreads higher.  Its increase marks the second consecutive day that the US RBOB/Brent crack has headed higher.
• Supply concerns maintained a downward pressure on the Asian gasoil market at the end of the week, with the contango² structure deepening in response to an overall bearish outlook for the middle distillate.
• Traders said the downtrend mirrored ongoing demand woes for gasoil, combined with expectations of higher supplies seen in the weeks ahead.  They also said this reflected concerns voiced by market participants that regional gasoil demand may have stalled due to dampened consumption following a resurgence of coronavirus cases across several Asian cities.

FOREX:  Philippine peso appreciated week-on-week against the US dollar by P0.30 to P48.63 from P49.93 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

These resulted to the total year-to-date adjustments to stand at a net decrease of P4.02/liter for gasoline, P8.89/liter for diesel and P13.29/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.

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 Asia-Pacific Weekly Recap, August 21, 2020
² Contango - is a situation where the futures price of a commodity is above the expected future spot price.