Oil prices to rise this week

INQUIRER FILE PHOTO

MANILA, Philippines – Fuel prices are expected to recover this week amid recurring supply concerns and an upward revision of growth estimates for the US, indicating good prospects for future fuel demand.

Industry sources’ estimates on oil price increases ranged around P0.20 to P0.50 per liter for diesel and by P0.50 to P0.75 per liter for gasoline. If prices adjust as expected, this will break the spell of rollbacks that lasted seven weeks for gasoline and two weeks for diesel products.

So far, the year-to-date total fuel price adjustments stand at a net decrease of P3.35 per liter for diesel and about P2.75 per liter for gasoline.

Such expectations of upward adjustments come amid supply concerns due to renewed tensions in the Middle East and indications of demand recovery due to growth data from the US.

The US economy’s growth rate in the second quarter was revised up last Thursday, indicating that its recovery was stronger than thought.  The US Bureau of Economic Analysis posted on its web site that the US economy increased at an annual rate of 4.2 percent, up from the initial estimate of 4 percent.

Traders said this indicated good prospects for business investment and consumer spending. The US is a large consumer of commodities including oil products.

As for supply concerns, there are fears a Russian backlash over the EU’s demands on Moscow to pull back military intervention in Ukraine could strain trade relations. Russia is a major oil and gas exporter and the EU’s No. 3 trading partner, which means Moscow pushing back over accusations of destabilization work in Kiev could potentially disrupt oil supply.

Given suspended and/or weak oil exports from Yemen, Syria, and Egypt, concerns on Russian oil and gas exports are enough to spook markets.

There is also the possibility that Iraq and Libya may scale back output amid security concerns. This, even though sectarian violence in northern Iraq has not brought much disruption in the southern oil fields and seaports.

RELATED STORIES

Another gas, diesel rollback to take effect Tuesday

Oil price up in Asian trade