WORLD OIL PRICES (September 8-12, 2014 trading days)

Dubai crude dropped to its two-year low price, posting last Thursday at about US$96/bbl, a dollar lower than Europe’s Brent. The price drop was reportedly caused by worries over mounting supply and weak demand, outweighing concerns that conflicts in the Middle East could curb oil production.

The International Energy Agency (IEA) disclosed in its recent oil market report that world oil demand growth is softening at a remarkable pace as the European and Chinese economies falter while supplies grow steadily, particularly from North America. IEA noted that demand growth in the second quarter of 2014 alone eased back to a near two-and-a-half year low. For the whole of 2014, the IEA reduced its oil demand growth projection by 150,000 barrels per day (bpd) to 900,000 bpd, and 100,000 bpd to 1.2 million bpd for 2015.

IEA further noted that non-OPEC supply is expected to expand by 1.6 million bpd in 2014, and by another 1.3 million bpd in 2015 on the back of the shale oil boom in North America. These suggest that the world needs less OPEC oil; thus it lowered estimated demand for OPEC crude and stocks for 2015 by 300,000 bpd to 29.6 million bpd versus August OPEC production of 30.31 million bpd.

In the Asian market, gasoline was said to have remained supported by firm regional demand. It also found firm fundamentals in Northwest Europe and the Mediterranean ahead of the seasonal refinery maintenance season, amid strong demand from Middle East buyers like Kuwait, Abu Dhabi and Saudi Arabia. While benchmark 92 RON gasoline flat prices have fallen sharply in recent days, tracking a decline in global crude oil prices, the recent spot buying in Singapore has pushed the product's cracks to the highest in more than a month. Demand is coming back from Indonesia and Vietnam. Cargoes to Australia were another key reason for the recent strength in the market. Despite the steepening contango in crude, gasoline market is likely to remain in deep backwardation due to the strong buying interest in the prompt market, Platts noted further.

On the other hand, supply of gasoil/diesel in Asia and the Middle East continued to outweigh demand, as
prompt cargoes in the region struggled to find buyers. Exacerbating a supply surplus are barrels that emerged from India for October loading while Thailand has also been sending a steady stream of cargoes, with Thai Oil as the latest seller as of Friday. On the demand side, buying interest from Southeast Asia appeared quiet.

On the other hand, supply of gasoil/diesel in Asia and the Middle East continued to outweigh demand, as prompt cargoes in the region struggled to find buyers. Exacerbating a supply surplus are barrels that emerged from India for October loading while Thailand has also been sending a steady stream of cargoes, with Thai Oil as the latest seller as of Friday. On the demand side, buying interest from Southeast Asia appeared quiet.

Overall, Dubai crude decreased week-on-week by US$2.80/bbl. MOPS diesel and gasoline decreased as well by about US$3 and US$1.60 per barrel, respectively.

FOREX:  Peso per US dollar rate appreciated week-on-week by P0.09 to P43.61, from P43.70 in the preceding week.

Other recommended reference sites:
(1) http://www.aip.com.au/pricing (2) http://www.med.govt.nz/ers/oil_pet/prices/prices.html

DOMESTIC OIL PRICES

Effective 16 September 2014, oil companies implemented a decrease of P0.70/liter for diesel, P0.25 to P0.30 per liter for gasoline and P0.65/liter for kerosene.

Year-to-date total adjustment for diesel and gasoline stands at P4.10/liter and P2.47/liter, respectively.

* RON 95

For more information, call the

Department of Energy:
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Email: oilmonitor@doe.gov.ph
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