By Myrna Velasco
Prices are returning to rollback mode this week, with a P0.40 cut per liter for gasoline and kerosene products.
There will be no movement in the price of diesel, according to the first pricing adjustment advisory issued by Pilipinas Shell Petroleum Corporation.
Shell will reportedly rollback prices effective 6 a.m. Tuesday (December 10).
The actual price cuts being implemented by the oil companies is lower than the initial calculations that had just been hinged on the outcome of four-day trading in the world market.
In the past two months, the Dubai crude which is the benchmark for refiners in the Asian market, has been on a seesaw with price ranging from US$60 to US$62 per barrel.
For finished product-importers, primarily the league of independent players in the Philippine downstream oil market, their pricing reference is anchored on the Mean Platts Singapore.
Oil prices had been on “very volatile mode” throughout the year, with most of the traditional fundamentals already broken in terms of setting pricing trends, hence, industry players are mostly experiencing squeezed margins – the Philippine oil companies included.
Meanwhile, the powerful OPEC group of oil producers and its allies reached a deal Friday to cut production by 500,000 barrels per day in a bid to stem prices which have been under pressure from abundant reserves and weak global economic growth.
Friday’s so-called OPEC+ meeting included Russia, the world’s second-largest oil producer and not a member of the cartel.
It ended with a deal for a cut effective as of January 1 which sets an output target 1.7 million barrels per day lower than October 2018 levels, with Saudi Arabia and Russia making almost half the additional reductions between them.
In a surprise move, the bloc also announced that several participating countries, “mainly Saudi Arabia”, would make additional voluntary cuts bringing the overall cut to more than 2.1 million barrels per day.
World oil prices surged in response, with US benchmark WTI and its European counterpart Brent both rising two percent in an initial reaction before settling down at levels around 1.3 percent higher on the day in the late European afternoon.
Iraqi Oil Minister Thamer Ghadban told reporters Friday that “what will happen during the first quarter (of 2020) will be assessed during an extraordinary meeting” of OPEC and its partners in early March.
He held out the prospect that the cuts could even be extended until the end of 2020 but that it was “too early to say now”.
According to Caroline Bain at Capital Economics, “the key uncertainty facing the oil market now is OPEC+ supply from April.”
She added that due to a subdued outlook for global growth, “our best guess is that the cuts will be extended for the remainder of the year.” (with a report from AFP)