Oil Monitor – Page 4 – PIP – Philippine Institute of Petroleum

WORLD OIL PRICES (July 27-31, 2020 trading days)
Source: Department of Energy Website

Dubai crude has decreased week-on-week by almost US$0.50/bbl. Both MOPS gasoline and diesel have also decreased by around US$0.75 and US$0.70 per barrel, respectively.

Reasons for the Adjustment

The weak US economic data put demand recovery outlooks in doubt amid rising global supply forecasts, and thus had affected on oil prices during the week.
The US reportedly had the largest-ever single-quarter GDP contraction in its history, as its GDP, estimated by US Department of Commerce, plunged by 32.9% in the second quarter this year. The US Department of Labor data also showed that weekly initial unemployment claims climbed to 1.43 million in the week ended July 25, putting the advance unemployment rate at 11.8%.
Nonetheless, even as demand outlooks dim, the market is bracing for a surge of new output as OPEC and allies officially began easing off their record production cuts starting August 01. The OPEC+ alliance relaxed its quotas by about 2 million b/d (MMB/D) from August through the rest of the year. The coalition appears eager to reclaim some of its lost market share, while not allowing the market to overtighten and unlock a wave of supplies from the US and other producers outside the group.
Some market analysts believe that increasing oil supply as OPEC did, during this time of continued weak demand, signals going back to supply surplus as has been observed in the second quarter. “OPEC’s experiment to increase production from August could backfire as we are still nowhere near out of the woods yet in terms of oil demand”, Bjornar Tonhaugen of Rystad Energy quoted.¹
Demand from top buyer China also softened due to weak margins, prolonged port congestion, severe flood and limited crude import quotas set by the government.²
Saudi Aramco is scheduled to announce its official selling price (OSPs) for September crude loadings to customers in Asia next week. The M1/M3 Dubai time spread is currently in a contango of minus 66 cents/b as compares to a backwardation of 65 cents/b this time last month³. The slide into backwardation over the past few weeks will be a concern for Aramco ahead of higher OPEC+ production starting August 01. A survey of market participants by S&P Global Platts news expects to see Aramco cut prices by between 30 cents and $1/bbl.
Gasoline remained bearish on slowing demand in the US and fresh coronavirus fears in Asia. In the US, demand was said to be almost flat since end-June, a period where it typically rises, due largely to rising COVID-19 infections in major states such as Texas, California, and Florida. Gasoline demand is facing both high infection numbers and end-of-peak summer demand next month. Thus, demand for gasoline is seen to weaken further in the coming weeks.
The emergence of new infections in Australia, Vietnam, and Hong Kong has coincided with a decline in mobility over the past two weeks. The continued surge of infections in India has also stalled the demand recovery, with mobility levels flat in recent weeks. The overall regional mobility index continues to trend upwards, but the slowing of the recovery is a bearish indicator of demand
going forwards.
Inventory of gasoil/diesel in Singapore was relatively stable in the past two weeks. However, Platts noted on the latest data indicator, which shows that exports from North Asia in the next two months will be down, i.e. by 70% year-on-year from Japan and by 30% year-on-year from Korea. Exports from Taiwan will also dip as Formosa reduces CDU and RFCC operations at its Mailiao refinery following a recent fire incident. However Chinese exports are set to rise in August on high inventories and lower domestic margins. China’s gasoil export is expected to average over 480,000 b/d through the rest of the year. The disparity between refining operations in China vs. the rest of Asia will remain a key driver for gasoil market through the second half of the year.

¹ Reuters.com
² Reuters.com
³ Contango: a situation where future price is high than the current spot.
Backwardation: a situation where future price is low than the current spot.

FOREX:

Philippine peso appreciated week-on-week against the US dollar by P0.18 to P49.19 from P49.37 in previous week.

DOMESTIC OIL PRICES

Effective 04 August 2020, the oil companies implemented a price decrease of P0.25-P0.30 per liter for gasoline, diesel by P0.25-P0.30/liter and P0.15/liter for kerosene.

This brings the total year-to-date adjustments to stand at a net decrease of P5.02/liter for gasoline, P8.59/liter for diesel and P12.69/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