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Cheap Oil A Boon For Philippines, Other Emerging Asian Economies

Posted by: : Paul EbelingPosted on: January 13, 2015 Cheap Oil A Boon For Philippines, Other Emerging Asian Economies

Cheap Oil A Boon For Philippines, Other Emerging Asian Economies

The downtrend in the price of Crude Oil in the world market would boost the economies of Oil-importing countries in Asia, including the Philippines, Thailand and China, according to economic analysts.

Monday, the price of Crude Oil fell further to US$48 bbl, or more than 50% less than the US$115 bbl in June last year.

The Philippines imports 93% of its Oil needs from abroad, mostly from the Middle East.

The country’s top suppliers of Crude and petroleum products are Saudi Arabia, followed by Russia, the United Arab Emirates (UAE), Malaysia, Qatar and Brunei.

Analysts said that the big drop in Crude Oil prices would naturally have a negative impact on oil-exporting countries in Southeast Asia such as Malaysia, Indonesia, Myanmar and Brunei Darussalam.

Malaysia, Asia’s biggest exporter of Crude Oil, could see Oil-related revenue fall to 3.1% of GDB in Y 2015 from last year’ s 5.9%, Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch, was quoted as saying in a report.

Some analysts said that lower Crude Oil prices would give China enough room to maneuver and maintain a GDP growth target of at least 7% this year, down from a targeted 7.5% in Y 2014.

South Korea and China’s Taiwan would also benefit from falling Crude Oil prices, they added.

Mark Williams, chief economist at Capital Economics, said the consultancy has raised its GDP growth forecasts for China’s Taiwan and South Korea by half a percentage point each amid the decline in oil prices.

For Thailand, whose economy has floundered for a year due to political turmoil and faltering exports, cheaper Crude Oil could mean faster growth. Its annual growth rate will rise 0.45 percentage points for every 10% fall in Oil prices, according to Bank of America Merrill Lynch.

For Indonesia, Southeast Asia’s largest economy, cheap oil means its new president could rid the country of crippling energy subsidies relatively painlessly.

In early January  Walter Zimmerman, chief technical strategist for United-ICAP in New Jersey, said that if the price of Crude Oil falls past US$39 bbl,”we could see it go as low as US$30 bbl.”It was Mr. Zimmerman who projected the Y 2014 drop. “Where prices bottom will be based on an emotional decision,” Mr. Zimmerman said.”It will not be based on the supply-demand fundamentals, so it is guaranteed to be overdone to the downside.”

In its December analysis of 45 economies worldwide, the Oxford Economics Ltd. said that the biggest winner in the Crude Oil price downfall would be the Philippines whose economic growth would accelerate to 7.6% on average over the next 2 yrs if oil fell to US$40 bbl while Russia would contract 2. 5% over the same period.

Ironically, despite the big fall in the price of Crude Oil, the Philippines net imports, the difference between the country’s Crude Oil imports and exports  in the 1st 9 months of Y 2014 rose by 2.98%  to US$9.68-B in the period from US$9. 4-B a year earlier.

Data from the US Department of Energy (DOE) showed that the country’s total imports from January to September climbed by 3.7% Y-Y to US$10.63-B with finished petroleum products accounting for 55% and Crude Oil the remaining 45%.

The cost of imported petroleum products grew by 4.49% Y-Y to US$5.82-B, while the cost of imported Crude Oil rose 2.34% to US$4.81-B.

The DOE said that the increase reflected higher volumes for imported Crude Oil and petroleum products.

Export earnings from petroleum and its processed products rose 11.72% to US$948.2-M in the 9 month frame.

HeffX-LTN Analysis for OIL: Overall Short Intermediate Long
Very Bearish (-0.66) Bearish (-0.46) Very Bearish (-0.78) Very Bearish (-0.75)

Stay tuned…


Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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