THE historic drop in global oil prices is a boon to countries like the Philippines, which imports most of its fuel needs, but it is also likely to derail its trade prospects this year, an analyst said.
“The freefall seen in energy also signals bleak economic growth on a global scale, which could limit trade prospects for the Philippines,” Nicholas Antonio Mapa, senior economist at ING Bank, told SunStar Cebu.
The National Economic and Development Authority has called for sustained trade sector reforms for the economy to overcome the challenges of a huge global economic slowdown.
The country’s major trading partners such as China, the US and Japan are facing economic shocks brought about by the global health crisis.
Mapa said the steep oil price drop could also hurt Filipino remittances especially those coming from the Middle East.
“The plunge however will hurt overseas Filipino workers based in the Middle East, and this could impair their ability to send home money,” the economist said.
Oil futures in the US plunged below zero on April 20, 2020, the first time in history, as Covid-19 lockdowns trigger a supply glut in the world market.
Consumption, however, will benefit from the lower oil prices.
“This will help bolster consumption as transport costs will be lower while inflation will also see less pressure to rise, so for consumption this is good,”
he said.
Lower fuel costs also provide relief to businesses that are under pressure to deliver earnings during the coronavirus lockdown.
Mapa sees that oil prices will stay lower as global demand collapses amid the massive lockdowns imposed in many economies.
“The actual spot price for oil may not be negative but they have come down quite a lot mainly due to depressed global demand on Covid-19,” he noted.
Asian shares
Meanwhile, Asian shares were lower Friday, April 24, after an early rally on Wall Street suddenly vanished, the latest example of how fragile the hopes underpinning the stock market’s monthlong recovery are.
Japan’s benchmark Nikkei 225 slipped 0.8 percent in morning trading to 19,270.04. South Korea’s Kospi lost 0.7 percent to 1,901.09, while Australia’s S&P/ASX 200 edged up 0.4 percent to 5,239.50. Hong Kong’s Hang Seng fell 0.5 percent to 23,860.76, while the Shanghai Composite stood at 2,823.29, also down 0.5 percent.
Investor sentiment was back on fragility mode as focus again shifted to the economic damage the world was likely to suffer because of the pandemic, said Prakash Sakpal and Mapa, economists at ING.
“Investors will continue to be monitoring developments on the Covid-19 front with a setback on clinical testing for a treatment to the virus. Meanwhile, the US passed a fresh round of stimulus while oil prices continued to inch up slightly,” they said in a commentary.
On Wall Street, the S&P 500 flipped between gains and losses and ended the day down 0.1 percent. It’s a microcosm of the extreme swings that have gripped markets for months, as investors struggle to set prices for where corporate profits and the economy will be months from now.
US benchmark crude rose 68 cents to US$17.18 a barrel. It rose 19.7 percent to settle at $16.50 a barrel. It has recovered after falling below $12 Monday, though it remains well below the roughly $60 level at the start of the year. Brent crude, the international standard, rose 49 cents to $21.82 a barrel. (WITH AP)