Oil prices seen dropping further

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PRICES of petroleum products are seen getting cheaper for the rest of the year up to the first month of 2016, according to an industry player.

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Danilo Alabado, PTT Philippines general manager, said the lower prices are driven by perceived oversupply of petroleum products.

“Oil prices will remain depressed in the coming months because of the perceived oversupply in the market,” Alabado added.

He cited the failure of Organization of the Petroleum-Exporting Countries (OPEC) to arrive at a consensus on how to manage supply.

“Just a few weeks ago, OPEC member-countries were not able to agree among themselves on how to manage supply,” Alabado said.

Because of this, he added, immediate reaction of the OPEC member- countries is to cut production.

Alabado noted that crude is 50 to 60 percent lower now as compared to the average in 2014.

“It might continue at this level at least for the first half of next year unless there will be major unforeseen events that will happen on the production side,” he said.

Raymond Zorilla, Phoenix Petroleum assistant vice president for external affairs, shared Alabado’s view.

He said the downward trend in prices of petroleum products will continue unless OPEC decides on how to manage the supply.

For the month of December alone, local oil firms have reduced pump prices for three consecutive weeks.

They rolled back prices of diesel products by a total of P3.70 per liter, P3.35 per liter for kerosene and 50 centavos per liter for gasoline.

The decline in crude prices has been prevalent since the second half of 2014 that also affected income of local oil companies.

Shell Philippines country chairman Ed Chua said if the decline will continue, the oil firms may again experience inventory losses.

“For example, if your crude was at $50 a barrel at the start of the year, then at the end of the year it became $35, so you lost $15,” he explained.

Chua cited the company’s experience last year when it incurred inventory losses because of continued decrease in crude prices.

“Last year, that happened to us, we had $110 at the start of 2014, then by the end of 2014 it went down to about $60, so our loss is about $50 per barrel,” he said.

RITCHIE A. HORARIO

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