MANILA, Philippines — Oil companies in the country raised on Tuesday pump prices of gasoline and diesel by P1.85 and 85 centavos per liter, respectively, and are expected to raise prices even more after the attack on oil fields in Saudi Arabia.

But following the attack on Saturday, global oil prices surged by 11 percent and are expected to further drive fuel prices up in the Philippines, stock brokerage Papa Securities said.

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“While one-third of lost capacity should be back by [Monday], industry experts still expect full repairs to span weeks, therefore oil prices are likely to stay elevated this month,” the stock brokerage said on Monday.

Saudi Arabia was the top supplier of crude oil to the Philippines last year. The country imported 33.7 percent of its crude from the Middle East kingdom as of 2018, according to the Department of Energy (DOE).

Surging crude prices would lead to higher prices of goods and services, and a large import bill, which could weaken the peso against the dollar.

Double whammy

A Singapore-based senior emerging markets strategist said the Philippines faced a double whammy should Middle East tensions worsen following weekend attacks on Saudi Arabia’s crude processing plants that knocked out more than 5 percent of global oil supply.

“If risk appetite collapses due to fears of worsening Middle East tensions in the wake of any retaliation to the drone attacks, some emerging markets could face a double whammy of pressures,” said Mitul Kotecha of TD Securities.

Peso risk-sensitive

Kotecha said the most risk-sensitive currencies in Asia were the Indian rupee, Indonesian rupiah and Philippine peso.

Yemen’s Iran-backed Houthi rebel group had claimed responsibility for the attack, which hit the world’s biggest oil-processing center.

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Saudi output halved

The attacks, which halved Saudi’s oil production, heightened investor worries about the geopolitical situation in the region and worsening relations between Iran and the United States.

“The impact on [local] prices [of the attacks], if any, may be felt by Tuesday next week,” Energy Secretary Alfonso Cusi said on Monday. “That is if there will indeed be an adverse impact.”

Jose Mari Lacson, head of research at ATR Asset Management, said it “may be too early to estimate how long the situation will last given it is still developing but if it persists, an impact on inflation is likely and could delay [Bangko Sentral interest] rate cuts.”

Saudi Arabia had said it would draw from three of its global storage sites to sustain deliveries while the United States would tap its reserves to stabilize the market. But according to Abacus Securities, oil prices would still likely soar because no timeline for the restoration had been given.

Insufficient spare capacity

“Other Opec (Organization of the Petroleum Exporting Countries) and Russia can pump more oil but they don’t have enough spare capacity to cover the entire shortfall,” Abacus Securities said in a research note.

It added that higher oil prices would in turn gnaw on the income of Philippine Airlines and Cebu Air while JG Summit, parent company of Cebu Air, which is also into the petrochemical business, would also be affected by higher input cost.

To a lesser extent, Abacus said logistics firms like MacroAsia and LBC, along with mining companies, would also see a substantial rise in fuel costs.

On the positive side, Abacus said oil refiners Pilipinas Shell Petroleum Corp. and Petron Corp. may book substantial inventory gains as soon as the third quarter.

Petron on Monday ruled out a disruption of fuel supplies in the country arising from the attack in Saudi Arabia.

Pilipinas Shell also assured the public that it was working to ensure continuous supply, especially for motorists.

Petron and Shell accounted for 45.2 percent of domestic fuel supply last year.

Sen. Sherwin Gatchalian said in a statement that the DOE should ensure that oil companies and refiners comply with the required minimum inventory of 15 days and 30 days, respectively, to cushion the impact of the attack in Saudi Arabia.

Philippine imports of Saudi crude plunged to 12 percent of total crude imports year-on-year as of June due to the scheduled maintenance of a local refinery, according to the DOE.

Last year, the Philippines paid $13.5 billion, or about P707 billion, for imported petroleum products, up 32 percent from that in 2017.

—With reports from Leila B. Salaveria, Inquirer Research and the wires

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