PH keeps close eye on oil amid possible supply disruption

The government is keeping a close eye on potential spillovers from the Israel-Hamas conflict and its impact on the Philippine economy, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said on Wednesday.

In a press chat with reporters, Mr. Remolona said the conflict has not “really affected” oil prices yet.

“The effects on oil prices have been minimal, but it may have spillover effects on global growth, for example, so that’s what we’re monitoring,” he said in mixed English and Filipino.

“In the past, something like this would have caused oil prices to spike, but so far it has not. The peso hasn’t really depreciated so far because of this. So, so far, so good. But of course, we’re watching. We’re watching developments. It’s a global phenomenon, by the way, so it’s not specific to us,” he added.

Oil edged higher on Wednesday as investors grappled with the prospect of supply disruptions due to the Middle East turmoil, Reuters reported.

Brent crude rose by 25 cents or 0.3% to USD 87.90 a barrel by 5:50 a.m. GMT. US West Texas Intermediate (WTI) crude rose by 24 cents or 0.3% to USD 86.21 a barrel.

Brent and WTI surged by more than USD 3.50 on Monday as the military clashes raised fears that the conflict could spread beyond Gaza but settled lower in Tuesday’s session.

Israel produces very little crude oil, but markets are worried that the conflict could escalate and disrupt Middle East supply, worsening an expected deficit for the rest of the year.

Monetary Board (MB) member Bruce J. Tolentino said “any intensification” of tensions in the Middle East could result in higher crude prices.

“As global crude prices move up, so will the prices of refined (petroleum) products in the Philippines. So, this is a crucial upside risk to monitor in the near term,” he said in a text message.

Another spike in global oil prices may stoke inflation, which the BSP is expecting to return to the 2-4% target in the fourth quarter.

Headline inflation accelerated for a second straight month in September amid higher food and transport costs. Inflation quickened to 6.1% in September, bringing the nine-month average to 6.6%. The BSP last month raised its full-year forecast to 5.8% from 5.6%.

GlobalSource Partners Country Analyst and former BSP Deputy Governor Diwa C. Guinigundo said signals so far indicate that the Israel-Hamas conflict might last longer than initially expected.

“Given the extent of the damage and death in Israel and with the firm declaration of war by (Prime Minister Benjamin Netanyahu), there is some basis to say the hostilities might be prolonged,” he said in a text message.

Mr. Guinigundo said that oil prices could surge if other oil-producing nations are drawn into the conflict.

“If (Saudi Arabia) and OPEC+ oil cutbacks are maintained, this could further exacerbate the instability in oil prices and the world economy,” he said.

“Supply chains might be affected and that could have a more extensive impact. Of course, it’s difficult to quantify all these assertions,” he added.

Top oil exporter Saudi Arabia said on Tuesday it is working with regional and international partners to prevent the escalation of the situation in Gaza and neighboring areas, and reaffirmed it supports efforts to stabilize oil markets.

“In the actual geopolitical context, crude oil could further rise toward the USD 90-USD 100 per barrel range but a rise beyond the $100 level is unlikely with the morose global economic outlook,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note. — Luisa Maria Jacinta C. Jocson with Reuters and Keisha B. Ta-asan