WORLD OIL PRICES (February 8-12, 2021 trading days)

Reasons for the Adjustment

• The International Energy Agency (IEA) in its Feb. 11 Oil Market Report pointed to a tightening oil market this year, despite lowering its estimate of the recovery in global oil demand and seeing improving non-OPEC supply growth.
  • The IEA predicts global oil demand will grow by 5.4 million b/d (MMB/D) in 2021 to reach 96.4 MMB/D, noting this would be around 60% of the volume lost to the pandemic in 2020.
  • This is the fourth straight month the IEA has lowered its demand outlook given the challenges the world has, brought about by COVID-19. IEA however could see optimism in the second half of the year.

• On prices, crude oil edged higher with investors expecting stronger demand for oil in Q2 amid the accelerating global vaccination program while compliance with agreed OPEC+ production cuts seemed to be holding..
  • Some analysts thought $60/bbl level could not be reached until a couple years down the road, but “the key whether the crude price rally continues is if we don’t see a spike in COVID-19 cases and as restrictive measures are eased” a market analyst noted.
  • But according to Platts Analytics, energy producers remain skeptical of the recent uptrend in crude prices, with retail investors also expecting prices to correct downward in the near term.

• For gasoline, while prices reached about US$65/bbl early in the week, the Asian gasoline market softened as the week ended, ahead of the Lunar New Year holidays. Reports disclosed signs of weakening fundamentals as well as a retreat in the US gasoline-Brent crack exerted downside pressure on the motor fuel complex.
  • The weaker fundamentals were reportedly led by more spot supply, with India’s state-run Mangalore Refinery and Petrochemicals Ltd., or MRPL, having emerged to offer 35,000 MT of 95 RON gasoline for loading March 15-17 from New Mangalore in a tender that closes on Feb. 17.
  • Indian gasoline demand, which according to Platts had helped support the overall complex through December 2020 and early January, also showed signs of a slowdown, as domestic gasoline consumption in whole month January fall 3.54% (89,000 MT) vis-à-vis December 2020.
  • Also exerting downside pressure was a weakening in the US gasoline-Brent crack due to latest data released by the US Energy Information Administration (EIA) which showed gasoline stocks climbing 4.3 million barrels the week ended Feb. 5.
  • The inventory uptick was just shy of the 4.8 million barrels estimated by the American Petroleum Institute and far higher than the 2.7 million barrels anticipated by analysts surveyed by Platts.

• Asian gasoil (diesel) market was reported steady with thinning supply and firm demand providing support to the complex and keeping it in a backwardated¹ structure.
  • Sentiment in the Asian gasoil market was also supported by reports that ExxonMobil Australia plans to shut its 80,000 b/d refinery in Melbourne and convert it into a fuel import terminal; traders said that gasoil exports into Australia looks set to continue rising on the back of the announcement.
  • There were also reports saying that lean production volumes from Japan and South Korea, and upcoming refinery turnarounds, could serve to cushion the impact of the bigger exports from China.
  • Thus, Asian gasoil balances are likely to have further tightening over the next few months as upcoming refinery maintenance operators may opt for earlier and longer turnarounds due to the depressed margins.

FOREX: Philippine peso appreciated week-on-week against the US dollar by P0.02 to P48.04 from P48.06 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

_______

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

_______

¹  Market condition where the forward or futures contract price of a commodity (or oil) traded below the expected spot price at contract maturity.