How PH oil execs see UAE departure from Opec
The decision of the United Arab Emirates (UAE) to leave Opec and Opec+ groups of major oil-producing nations may turn out to be a good development for the Philippines if the former decides to ramp up its supply, according to industry sources.
Leo Bellas, Jetti Petroleum president, said the new development amid the Middle East conflict could put pressure on oil prices “in the near-term,” with the UAE being the third-largest producer in the association.
With the UAE leaving the organizations by May 1, Bellas told reporters on Wednesday that this would “remove a meaningful buffer at a time global spare capacity is already at historical lows following the Hormuz crisis.”
‘National interests’
Opec (Organization of the Petroleum Exporting Countries) is composed of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, UAE, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea, and Congo.
Opec+ covers Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan, and Sudan.
The UAE on Tuesday said its decision was meant to focus on “national interests” following increased investments in production capacity.
But a silver lining is also in sight, according to Bellas and two more industry sources.
“In the medium-term, it is conditionally bearish in structure as the UAE will have the flexibility to respond to market dynamics and produce more freely,” Bellas said.
“If it will produce more supply without following the output limits of Opec production and offer reduced prices to capture a bigger chunk of the market, then it may be good for the Philippines,” energy law expert Jose Layug Jr. said.
Global benchmarks
Brigitte Carmel Lim, senior vice president and COO of Cebu-based fuel firm Top Line, said in a separate message that if the UAE decides to hike its output independently, this could help ease prices.
“That’s still uncertain,” Lim, however, noted. “In the near term, this just adds price volatility, not a supply shortage.”
“For the Philippines, pump prices will still follow global benchmarks with the usual one- to two-week lag,” she added.
Lim said she was “not seeing any supply tightness locally.”
Currently, the impact of the closure of the Strait of Hormuz, a crucial maritime route for energy trade, continues to affect global oil prices.
“For now, worries about supply constraints from the closed Strait of Hormuz… outweighs concerns on the bearish effects of UAE’s departure from Opec and Opec+,” Bellas added.
Price downtrend
For three consecutive weeks, diesel prices in the Philippine market have been on a downtrend since the announcement of a ceasefire between the United States and Iran.
Fuel retailers implemented another price cut of at least P12.94 per liter for diesel for the week of April 28 to May 4.
Gasoline, on the other hand, inched up by up to 53 centavos per liter.
