Pump prices are expected to fall further even as crude oil producers are considering a return to production cuts in a bid to avert a possible price crash similar to what happened in 2014.
Oil producing countries, led by the Organization of Petroleum Exporting Countries (Opec) and non-Opec members, saw a pact that was implemented in late 2016— through the so-called Vienna agreement—interrupted by Saudi Arabia’s move to raise output last October.
Analysts are now attributing the price slump to such move by the cartel’s biggest producer—and the world’s third-biggest producer after the United States and Russia.
In the Philippines, a five-week series of price cuts took away a total of P5.05 a liter in the price of diesel and P7.50 a liter for gasoline.
This practically reversed a series of price increases seen in the nine weeks before that, when the price of diesel rose by a total of P5.85 a liter and gasoline by P5.05 a liter.
According to the International Energy Agency, global oil supplies were growing rapidly as record output from Saudi Arabia, Russia and the US more than compensated for decreased output from Iran and Venezuela.
In October alone, global output was 2.6 million barrels per day (mbpd) higher than in the same month of 2017.
Opec crude output rose 200,000 bpd in October to 32.99 mbpd while output from non-Opec producers, including the US and Russia, are expected to grow by 2.4 mbpd this year.
“[We have] noted that since the middle of the year oil supply had increased sharply, with gains in the Middle East, Russia and the United States more than compensating for falls in production in Iran, Venezuela and elsewhere,” the IEA said in its latest oil market report.
“New data show that the pace has accelerated and this higher output, in combination with Iranian sanctions, waivers issued by the US and steady demand growth, implies a stock build in the fourth quarter of 2018 of 700,000 bpd,” the IEA added.
Further, the price of crude oil has fallen to “a more reasonable level” close to $70 a barrel, well below where it was in May before the US announced a reimposition of sanctions against Iran.
The IEA was referring to the average price of Brent crude—considered the de facto global benchmark—which fetched $66.67 a barrel as of last Friday.
Dubai crude, the bellwether for Asian markets, was trading at $67.55 a barrel as of Nov. 15.
“Lower prices are clearly a benefit to consumers, especially hard-pressed ones in developing countries that are suffering from the additional handicap of weak national currencies,” the IEA said.
“Ministers from the Vienna Agreement countries will meet in early December, but we have already seen suggestions from leading producers that supply could be cut soon,” the IEA said.