WORLD OIL PRICES (June 8-12, 2020 trading days)
Dubai crude increased week-on-week by around US$1.50/bbl. MOPS gasoline and diesel have also increased by more than US$3.00 per barrel.
Reasons for the Adjustment
- The effect of the 06 June 2020, OPEC and its allies agreement to continue their current production cuts of 9.6 million bpd through July, as the bloc seeks to speed the market's recovery from the pandemic except for Mexico, whose participation will end after June continues to support the ongoing uptick in price for the past two weeks.
- The cuts are scheduled however to taper to 7.7 million b/d (MMB/D) from August to December, and then down to 5.8 MMB/D from 2021 through April 2022.
- In addition, optimism over a swift and steady economic rebound from crushing pandemic lockdowns have helped global oil prices stage a speedy rebound from near two-decade lows in April.
- This increases in price however are largely supply- rather than demand-driven which is seen, so far at this time, to be unsustainable as global oil demand keeps on track to still shrink by around 8 million bpd year–on-year to around 92 million bpd in 2020 from an average of 100 million bpd in 2019. EIA likewise sees 2021 global oil demand to averaging 99 million bpd, which is still around 1 million bpd lower than the 2019 levels.
- According to Reuters, the moderate increases in prices for the past two weeks were the results of disappointment among traders that the extension of the 9.6 million bpd was only by a single month (June to July).
- There is also the problem of compliance among some OPEC members. Saudi Arabia put its foot down at the 06 June meeting, insisting that Iraq and Nigeria not only deepen their production cuts to match their quotas but also deepen them further to compensate for shortfalls in compliance last month. Yet history suggests this will not be enough to get them in line.
- Standard Chartered is even more bearish, predicting slow recoveries in jet fuel demand and diesel demand will hobble the US rebound next year. Most market watchers’ fears that the pandemic could inflict lasting damage on oil demand due to less commuting, fewer business trips and hardwired adoption of social distancing.
- Analysts predict that with post-COVID normal, it may be some time before market watchers can confidently call the world's return to full health, and with it, their appetite for oil. Hedging activity in the Middle East crude paper markets has started to plateau due to supply cuts and rising prices. Crude traders said that the month-on-month decline was likely an after-effect of an initial rush to hedge crude in storage over March and April when oil markets fell deep into contango1.
FOREX: Philippine peso appreciated week-on-week against the US dollar by P0.24 to 49.93, from P50.17 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
Effective 16 June 2020, the oil companies implemented a price increase in petroleum products. Gasoline has increased by P1.25/liter, P1.10/liter for Diesel and P0.75/liter for kerosene.
This brings the total year-to-date adjustments to stand at a net decrease of P6.72/liter for gasoline, P9.99/liter for diesel and P13.69/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 Contango- the normal situation in which the spot or cash price of a commodity is lower than the forward price.