MANILA – The diplomatic crisis now roiling the Middle East involving Qatar and seven of its neighbors could result in lower oil prices, the Department of Energy said Wednesday.
DOE spokesperson Wimpy Fuentebella explained why: although the markets are not yet feeling the full impact of the severing of diplomatic ties with Qatar by seven countries led by Saudi Arabia, the so-called “production freeze” adopted by the Organization of Petroleum Exporting Countries (OPEC), of which Qatar is a member, could be in peril if the crisis is not resolved soon.
The freeze had been imposed as a way to arrest the steady plunge in oil prices, and the unfreezing could cause global prices to go down again.
On Monday, Saudi Arabia and the United Arab Emirates, Egypt and Bahrain severed diplomatic ties with Qatar, which they accused of being too soft on terrorism.
The four countries were joined later in the day by Yemen, Libya and the Maldives.
If Qatar decides to scuttle the limits on the oil it releases to the market, that would add to the “oversupply” of crude and cause prices to decline, DOE said.
Per DOE data, Qatar accounted for only 2,618 barrels of crude in 2016, or 3.32% of the total oil market. Still, according to DOE, any additional supply released by Qatar into the market will definitely have a downward pull on oil prices.
Fuentebella said, speaking partly in Filipino: “As of now, monitoring does not indicate any change yet; we don’t know what their [Qatar’s] reaction will be – whether they will continue to abide by their OPEC commitment to control supply or not.”
LPG prices could rise
In the Philippines, added Fuentebella, the impact could be felt on LPG prices. Qatar is the country’s biggest supplier of LPG.
DOE said, the country could turn to other suppliers should there be a problem with Qatar.”The Philippines got much of its supply from Qatar in previous years, but there are other suppliers that can fill in the gap should there be problems with Qatar,” said Fuentebella.
Meanwhile, as the impact of the crisis on oil prices is not yet felt completely, the downward adjustment that began this week is seen to continue till next week, said the DOE official.
Per DOE monitoring the decline in oil prices in the world market in the first two days of this week is equivalent to P0.70 to P0.90 a liter.
The lower prices are still being attributed to oversupply.