Oil stabilized after a steep drop due to rising Russian flows and higher US output, causing concerns that supply is outpacing demand.
Brent and West Texas Intermediate traded near $73 (Ksh.11,157.51) and $68 (Ks.10,427) respectively, with Russia’s seaborne crude exports reaching their highest level since early July, and the US increasing its output estimate.
Brent and WTI futures are in bearish contango structures through to the middle of 2024, with prompt barrels at discounts to later ones. WTI’s 12-month spread dipped into contango on Tuesday for the first time in a year.
Crude has declined by 25% since September, with OPEC+’s output cuts failing due to skepticism, Chinese consumption growth slowing, and US recession potential.
Oil is facing “a US-led bump in non-OPEC supply and doubts over OPEC compliance colliding with some prospects of demand softening,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. in Singapore as reported by Bloomberg.
In South Africa, the prices are largely determined through the International oil costs and the rant exchange rate. These two factors play the leading roles in petrol prices.
Furthermore, essential factors due to the prices dropping include an increase in production, strong local currency, and fears over strong global economic growth.
Other decreases are for diesel, which will cost between R2.35 (Ksh.18.98) and R2.41 (Ksh.19.46) a litre less.
Illuminating paraffin price will also go down by R1.71 (Ksh.13.81).
LP Gas is to cost R1.67 (Ksh.13.41) a litre less. This is the second consecutive fuel price decrease.
The petrol retail price is regulated by government (SAPIA – South African Petroleum Industry Association) and is adjusted every first Wednesday of the month.
The Organization of Petroleum Exporting Countries releases its monthly market report later Wednesday, while the Federal Reserve is set to make its final rate decision of the year.
On Thursday, the Paris-based International Energy Agency will publish its monthly outlook.
