Metrobank sees minimal impact on inflation from higher fuel cost

MANILA, Philippines — Metropolitan Bank & Trust Co. (Metrobank) said rising pump prices of petroleum products as a result of higher price of oil in the world market would have minimal impact on inflation.

In a report, Metrobank analyst Pauline Revillas said pump prices have risen after successive rollbacks in the last quarter of 2018 amid the pickup in global oil prices.

“Nevertheless, the impact of rising local pump prices will likely be minimal, with domestic inflation still seen to continue easing amid the Rice Tariffication Law effect on rice prices,” she said.

Revillas said crude oil bulls have been influenced by a number of factors including optimism toward the US-China trade deal, abrupt halt in Venezuelan production, news that OPEC is planning to keep its production and supply cut enforcement until June 2019.

Another factor, she said, was the announcement that the US would no longer grant sanctions waivers to any importer of Iranian oil effective May 1.

Price of crude for June delivery is now at $65.70 per barrel, while Brent crude is now at $74.43 per barrel from their end-December levels of $45.15 per barrel and $50.57 per barrel, respectively.

“The increase so far this year, however, is still below the peak seen in October 2018 when WTI reached $75 per barrel and Brent climbed to the $86 level,” she said.

Furthermore, Revillas said these recent gains could still be capped by prospects of a slowing global economy, which in turn could change the supply-demand ratio.

Earlier, BSP Governor Benjamin Diokno said further risks could emerge from prolonged El Nino weather condition as well as higher than expected increasing global oil and food prices.

While average price in the first quarter was lower, Diokno said global crude oil prices have steadily increased over the past few months due to the extension of reduction cuts by petroleum exporting countries, supply disruptions in Libya as well as the sanctions imposed by the US on Venezuela and Iran.

The BSP chief said the estimated futures prices of Dubai crude oil as of end-March showed higher path for 2019 to 2022 compared to the estimates of the previous quarter.