Oil prices to go up on supply concerns, optimism on US rebound

AFP FILE PHOTO

MANILA, Philippines — Local oil prices may increase this week on supply speculation and signals of recovery in the US economy.

Industry sources said diesel prices might increase by less than 50 centavos per liter and gasoline prices by more than 50 centavos per liter because of lingering tensions between Ukraine and Russia, the world’s seventh largest crude shipper and major exporter of crude oil to Europe and Asia.

Also supporting prices are lower unemployment figures in the US, which is seen to drive demand even though North America seems to have enough fuel supply.

According to the Department of Energy’s (DOE) Oil Monitor report, year-to-date total adjustments showed a net decrease by 95 centavos per liter for diesel and a net increase of 10 centavos per liter for gasoline. That excludes the price hike expected to take place this week starting Tuesday.

There has been mounting concern recently that energy supplies to Europe could be disrupted amid worsening relations between Ukraine and Russia. Analysts have said that if Russia decides to cut off crude buyers going through Ukraine, this could make oil prices surge.

Elsewhere, Libya’s eastern Zueitina oil export terminal is back in government control after rebels agreed last week to stop occupying four ports – Zueitina, Hariga, Ras Lanuf, and Es Sider. However, only Hariga’s export terminal is set to reopen as technical problems plague Zueitina. The situation at the larger Ras Lanuf and Es Sider ports are not yet clear.

There has also been concern about the spread of Islamist insurgency in Nigeria, which increased worries about oil supply disruption.

Platts has noted that gasoline prices were expected to remain strong, specifically in Asia, amid expectations of supply tightening over the next two months because of the spring turnaround season across Asia, and higher demand for the Ramadan period in July.

Sentiment is seen to be bullish for May and June, as Indonesia, the region’s single-largest gasoline importer, begins stock building ahead of a seasonal rise in demand during Ramadan.

Analysts said this could further prop up an already strong gasoline market.

Meanwhile, the DOE’s Oil Monitor said the Asian gasoil/diesel market was likely to see greater support on growing demand strength in Europe. Singapore-based traders believed that the strength was most likely linked to the increasing tension between Ukraine and Russia.