May 31, 2023

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Gov’t downplays impact of OPEC+ cuts

2 min read

FINANCE Secretary Benjamin E. Diokno said on Tuesday it is too early to assess the impact of the surprise output cut by the world’s largest oil exporting countries on Philippine inflation.

“I think the OPEC countries are kind of anticipating that oil prices, if they do not do anything, will go lower than what it is right now… I assume this was done to anticipate that reduction…  It’s also because of some forecasts for a global slowdown. So the demand for oil can slow down while there’s a cutback,” he said during a press briefing on Tuesday.

The Organization of the Petroleum Exporting Countries and their allies including Russia (OPEC+)on Sunday announced further output targets  cuts of around 1.16 million barrels per day (bpd) from May through the rest of the year.

Analysts warned these OPEC+ production cuts may drive global oil prices to above $100 per barrel this year.

“So we don’t know yet the impact on Philippine inflation…  As far as I know, (based on) the NEDA (National Economic and Development Authority) and BSP (Bangko Sentral ng Pilipinas (BSP) forecasts, the threshold for oil is $90 per barrel,” Mr. Diokno said.

The Finance chief made the statement ahead of the release of March inflation today (April 5).  The BSP earlier said inflation likely eased to between 7.4-8.2% in March, from 8.6% in February, although this is still above the 2-4% target range.

The BSP projects average inflation to settle above the 2-4% target range at 6% this year.

Mr. Diokno said as an oil-importing country, the Philippine can only manage the demand for oil.

“There are many moves to conserve the use of energy. Like we’re shifting now to EVs (electric vehicles). That’s what I mean by there’s many moving parts. It’s hard to forecast what will happen next,” he added.

Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. said that the global oil output cut is an “inflation risk” moving forward.

“The impact of this…


2023-04-04 12:33:12

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