Oil and peso weakness keep inflation pressure elevated

Domestic fuel prices are set to rise for a third straight week, with diesel up as much as P8.82/l and gasoline P4.80/l. Pump prices could reach roughly P121/l for diesel and P112/l for gasoline, as regional supply risks and peso weakness amplify higher global oil costs.

We think the more important macro signal is persistence. The Department of Energy (DOE) expects fuel prices to remain above prewar levels through year-end, implying transport and logistics costs could stay elevated into 4Q26. The weaker peso adds another layer of pressure by raising the local cost of imported crude.

Oil inventories of 50-54 days suggest the Philippines faces a price shock rather than an immediate physical shortage. A fuel excise-tax reduction could partly cushion pump prices, while further Middle East escalation or renewed shipping disruptions would keep upside risk to inflation and the Bangko Sentral ng Pilipinas (BSP) policy path elevated.

We would stay underweight fuel-sensitive discretionary and transport exposure, remain selective on property and consumer cyclicals, and favor dollar earners plus defensives with stronger pricing power. We would become more constructive once oil falls sustainably below US$90 and the peso strengthens enough to reduce imported inflation pressure.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.

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