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July 14, 2016

Oil prices seen plunging to $20 per barrel

MANILA, Philippines – Oil prices might plunge to $20 per barrel with the collapse of the Doha talks, and this would be good news for the Philippines, which is heavily reliant on imported fuel, a lawmaker said yesterday.
 
Liquefied Petroleum Gas Marketers’ Association party-list Rep. Arnel Ty said a potential pact being hammered out in Doha to restrict oil output by 18 members and non-members of the Organization of Petroleum Exporting Countries (OPEC) to keep prices up collapsed Sunday after Iran refused to participate.
 
Despite global oversupply, Ty said Iran has been ramping up oil production following the lifting of Western sanctions as part of a nuclear deal. Once the world’s second largest oil producer, Iran is raring to grow market share and is exporting up to 1.9 million barrels of oil per day, he said.
 
“The breakdown of the Doha talks means that Filipino households and businesses will enjoy for an extended period the economic benefits of depressed oil prices, including gas and electricity bills that are easy on the pocket as well as low transport costs,” Ty said.
 
“The huge cost-savings from cheap oil has put extra cash in the pockets of Filipino consumers, and the increase in buying power has helped stimulate demand for goods and services, thus firing up the domestic economy,” he added.
 
He said oil prices would likely drop to below $30 per barrel and possibly sink to as low as $20.
 
Owing to the steep drop in oil prices, he said the Philippines generated P238.43 billion in cost-savings from the crude oil and finished petroleum products it imported last year.
 
Citing data from the Department of Energy, Ty said the Philippines spent only $7.19 billion to pay for its oil imports in 2015, down 42 percent from the $12.43 billion it spent in 2014. 
 
The country purchased oil mainly from Saudi Arabia, Kuwait, United Arab Emirates and Qatar at an average cost of $60.06 per barrel in 2015, down 46 percent from $106.89 per barrel in 2014.
 
After surveying 45 countries, the global forecasting firm Oxford Economics Ltd. had predicted that the Philippines, which imports nearly all of its oil requirements, would prosper the most and its economy grow fastest in a low oil price setting.
 
“Even assuming oil does not nose-dive to $20, it is clearly not going up anytime soon, as long as the market is swamped with a big surplus,” Ty said.
 
The world market is oversupplied at a rate of 1.5 million barrels of oil every day, according to commodity analysts.
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