Another hefty fuel rollback this week

Updated March 22, 2020, 8:10 AM By Myrna M. Velasco
https://business.mb.com.ph/2020/03/20/another-hefty-fuel-rollback-this-week/

As oil prices in the international market plunged to $26-$27 per barrel level, the lowest since 2014, the price of fuel at the pumps is expected to be cut anew by ₱2.00 to ₱3.50 per barrel this week.

Based on the preliminary calculation of oil companies, the low oil prices could translate to ₱2.00 to ₱2.50 per liter reduction for diesel and from ₱3.00 to ₱4.50 per liter cut for gasoline.

However, such a slash in prices would not be able to fully benefit Filipino consumers are most are confined in their homes as part of the government’s enhanced community quarantine measure against the spread of the coronavirus.

The industry players said the estimates had been based on the outcome of four-day trading in the world market, and would still change depending on Friday (March 20) trading’s result.

The price of Dubai crude, which is the benchmark for the Asian oil refiners, had skidded to US$27 per barrel as of March 19 trading, which is US$4.0 to US$5.0 per barrel lower than last week’s prices.

The worry of the international market now is the continuing precipitous slide in prices that may nosedive to as low as US$10 per barrel, given the extremely shrinking demand due to the constricted movement of the global population.

In the Philippines, there is a prevailing price freeze on key petroleum products, primarily liquefied petroleum gas (LPG) and kerosene which are essential commodities in Filipino households.

Nevertheless, it was clearly stated in a Department of Energy (DOE) announcement that despite the price freeze, rollbacks shall be implemented.

For kerosene products, it has been calculated that this will have price cuts of P3.00 to P3.50 per liter next week, based on the numbers preliminarily crunched by the oil companies.

For LPG, pricing adjustments will be due by April 1, and this is also anticipated to have massive cuts given recent price swings in the world market.

The oil markets would be among those seen extremely battered as the world continues to grapple with the uncertainties brought by the relentlessly spreading coronavirus which has stalled economic and human activities across continents.

In the international market, oil rose further Friday after a dramatic rebound from multi-year lows, but stayed below $30 a barrel on fears the deadly coronavirus will push the world into recession with an oversupply.

U.S. benchmark West Texas Intermediate (WTI) was up 3.65 percent to $26.14 a barrel in midday Asian trade.

Brent climbed 2.14 percent to $29.08 a barrel.

On Thursday, WTI rebounded by more than 23 percent following U.S. government moves to help American crude producers weather a slump in demand caused by the coronavirus pandemic, recovering almost as spectacularly as it had plunged in recent days.

Crude slumped to 18-year lows Wednesday, with travel restrictions and other measures aimed at combating the virus hitting demand and major producers Saudi Arabia and Russia locked in a price war by ramping up production.

”Oil prices are recovering… as the three-day collapse saw some bottom fishing after WTI failed to break the $20 a barrel level,” said OANDA senior market analyst Edward Moya.

”The oil rebound also extended higher after (U.S.) President (Donald) Trump stated he would get involved in the oil price war at the appropriate time,” Moya said in a note.

”The Trump administration is now showing signs they will try to defend the shale industry and stabilize oil prices.”

The U.S. Department of Energy said Thursday it will carry out Trump’s directive to top up the Strategic Petroleum Reserve to its maximum capacity.

The department said in a statement on its website it will buy a total of 77 million barrels from American producers, kicking off with an initial purchase of 30 million barrels.

Oil markets have been hammered by collapsing demand as the virus prompts sweeping travel restrictions and business closures, and as major producers Saudi Arabia and Russia engage in a price war.

The U.S. energy department ”is moving quickly to support U.S. oil producers facing potentially catastrophic losses from the impacts of COVID-19 and the intentional disruption to world oil markets by foreign actors,” said U.S. Energy Secretary Dan Brouillette. (With AFP)