WORLD OIL PRICES (August 3-7, 2020 trading days)

Reasons for the Adjustment

• The demand outlook for Middle East sour crude is likely to remain capped even as Saudi Aramco lowered/cut its fresh official selling prices (OSP). Aramco set the September Asia OSP for Arab Super Light and Arab Extra Light, at premiums of $2.05 and 70 cents/b to the Dubai/Oman average; hence a drop of 60 cents/b and 50 cents/b, respectively.
• In Asia, the cuts were not as aggressive as analysts had expected, and refiners were probably less than pleased. The adjustments force refiners to temper run rates and rely more on product stocks to meet the recovery in demand. In this sense, Saudi is clearly not pushing volume into the market, though it has additional volumes to sell due to lower domestic burn, and a higher OPEC+ allocation. When product stocks have tightened due to a fundamental improvement in demand (which will result in higher refinery margins), the stage will be set to supply the market with more crude as refiner demand will support it. Only at that point can Saudi provide additional incentive to refiners to lift additional barrels, without unduly undermining market structure.¹
• Price differentials for middle distillate-rich Malaysian and Vietnamese crude grades are expected to weaken in coming months amid an influx in supply of arbitrage barrels and weakening product margins as the resurgence of COVID-19 cases keeps a firm lid on product demand.
• Oil futures settled lower as demand outlooks came under pressure amid rising US-China tensions and lack of progress on a US stimulus package.
  • US President Donald Trump issued two Executive Orders giving US companies 45 days to stop dealing with Chinese companies ByteDance (the Chinese owner of TikTok) and WeChat.
  • US-China tensions came under further pressure after the White House imposed sanctions on a number of senior Chinese officials for their roles in the recent crackdown on dissidents in Hong Kong.
• The Asian gasoline market strengthened slightly toward the end of the trading week, as evidence of healthier supply-demand dynamics in the near term boosted sentiment.
• News of renewed lockdown measures in the Philippines and Australia further dampened the already weak sentiment. However, the emergence of additional demand from Indonesia for August helped to reverse momentum.
• Demand concerns continued to weigh on sentiment in the Asian gasoil market. Yet, industry sources said East-West arbitrage economics was improving thanks to declining freight rates that could help prop up the market.
• Gasoil markets have been mostly stable over the past two months, but are showing signs of weakness with an expected resurgence of Chinese export volumes. Adding to this are concerns about the state of demand given recent coronavirus resurgence in import markets such as Australia, the Philippines, and Vietnam, as well as ongoing troubles in India and Indonesia.

FOREX: Philippine peso appreciated week-on-week against the US dollar by P0.11 to P49.08 from P49.19 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

This brings the total year-to-date adjustments to stand at a net decrease of P4.77/liter for gasoline, P8.79/liter for diesel and P13.04/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 Saudi Aramco cut September OSPs to Europe more than those to Asia on weaker market structure, with crude exports expected to increase on easing domestic demand (Platts Dimensions, August 6, 2020)