Softening of oil prices seen

Energy Secretary Vincent S. Perez said yesterday local oil prices may soften as a result of the Organization of Petroleum Exporting Countries (OPEC) to raise its production by 1.5 million barrels of oil per day.

"We welcome OPEC’s decision to raise production by 1.5 million barrels per day to keep global oil prices at reasonable price of $25 per barrel. This is a breather for us and we hope that world oil prices will react positively to this news," Perez said.

The energy chief said they would continue to monitor the local market prices. "We will wait and see how this will affect our local Softening pump prices. The Department of Energy will continue to monitor our prices," Perez said.

Pilipinas Shell Petroleum Corp. external affairs general manager Roberto Kanapi explained that there are two ways that the local prices affected.

"It (OPEC’s decision) can be felt immediately in the spot market prices," Kanapi said. Oil firms use spot market prices as benchmark for their finished products which they export.

For local crude price adjustment which is done every month, oil companies use Dubai crude as benchmark.

"So if there will be effect on the local market, it can be reflected in a month’s time," Kanapi said. But Kanapi said the deciding point here is not actually the OPEC’s decision to increase production but the Iraq-US situation.

Eastern Petroleum Corp. (EPC) chairman Fernando Martinez said the impact of the OPEC move may not be felt immediately.

"We have yet to use up all our inventories which we purchase at a higher price. It will take effect in the world market first before we can feel it in the local front. This may be felt in two to three month’s time," Martinez said.

Martinez said by that time, many things will have happened like the threat of Iraq-US war.

According to Martinez, Dubai crude had soared during the past few weeks. As of Jan. 10, Dubai crude averaged $27.13 per barrel while for the period Jan. 2 to 10 he average was $26.87 to 10 the average was $26.87 as against $25.73 average in December 2002. The peso averaged P53.60 to a dollar as of Jan. 10, 2003 compared to December 2002’s average of P53.48.

After increasing prices by 49 centavos per liter in recent weeks, the oil firms have been saying that a new round of price hikes is inevitable.

Eastern and Unioil Philippines Inc. said they are likely to implement oil price hikes ranging from 0.71 to P1.30 per liter as a result of the CAA implementation.

However, Eastern and Unioil have agreed that the price adjustments should be done in small increments.

"We cannot implement the P0.71 and P1.30 per liter increases for diesel and gasoline, respectively in just one blow. We already implemented the first round. Ideally, the second round should be also in this month otherwise the adjustment may just balloon," Martinez said.

Unioil vice president for marketing Bobby Tanyag said they are eyeing a 50-centavo per liter increase in its petroleum prices to be implemented after its inventory supply runs out by next week. He said another 20 to 30 centavos per liter will be added as a result of new gasoline specifications under the CAA.

"There will be two more oil price increases after the recent one. All in all the prices of gasoline and diesel will go up three times. The first was already implemented last week when we raised out prices by 49 centavos per liter. The second increase will probably happen 15 days from now when our supply runs out, which probably is the same timeframe the other oil companies have. The third price increase could be done next month," Tanyag said.