Fuel prices at pumps to marginally increase in June – IES

The Institute for Energy Security (IES) is predicting a marginal increase in fuel prices at the pumps in Ghana in the first pricing window of June 2021.

The price of fuel on the local market remained stable in May despite an expected marginal increase by the Oil Marketing Companies (OMCs) at the start of the pricing window.

Currently, the national average price of fuel per litre at the pump still remains pegged at Gh¢5.78 for both products.

Taking into consideration variables on the international market including 1.05% increase in the price of Gasoline, the 2.66% increase in Gasoil price, and the cedi depreciation of 0.35% against the US Dollar, the IES says it foresees a marginal increase in the price of fuel in the first pricing window of June 2021.

“With the 3.50% increase in price of the International Benchmark-Brent crude together with the 1.05% increase in price of Gasoline, the 2.66% increase in Gasoil price, and the cedi depreciation of 0.35% against the US Dollar; IES predicts that OMCs in Ghana may increase fuel prices marginally at the pump due to these international market variables as we enter June 2021, particularly for those that maintained their prices at the pump from the first pricing-window of May through to the end of the second pricing-window,” part of an IES release signed by Research Analyst Fritz Moses said on Monday.

Meanwhile, the IES indicates that due to the market leadership role played by GOIL and a few others, and with the aim of increasing market share, OMCs may opt to maintain the current prices at the pump.

Below is the full release from IES:

FUEL PRICES MAY RISE MARGINALLY DUE TO INTERNATIONAL MAREKT VARIABLES

REVIEW OF MAY SECOND PRICING-WINDOW

Local Fuel Market Performance

Price of fuel on the local market remained stable within the period under review despite an expected marginal increase by the Oil Marketing Companies (OMCs) at the start of the pricing window. The current national average price of fuel per litre at the pump still remains pegged at Gh¢5.78 for both products.

For this Pricing-window, Zen Petroleum, Benab Oil, Goodness Oil, Top Oil and Frimps Oil were picked up by the IES Market-Scan as the OMCs with the least-priced petroleum products at their pumps.

World Oil Market

The second pricing-window of May saw the international benchmark, Brent crude price average about $68.01 per barrel mark representing a 3.50% increase from the previous window's average price of $65.71 per barrel.

Source: IES Construct 2021, with data from oilprice.com and Bloomberg.

The Brent Crude price reacted to the usual volatilities in the market within this window. Prices of the benchmark briefly touched $70 per barrel on Tuesday 18^th, May 2021 but slipped downward again on news of a breakthrough in the Iran Nuclear Deal between the US and Iran. This was later denied. The slip in prices continued till Thursday, 20^th May 2021 on the announcement by the Iranian President that world powers had accepted to lift the sanctions on Iran.

The slump in prices represented a three-week low largely in response to the geopolitical tensions in Iran's relations with the world powers that continued in the nuclear talks. The EIA report of a 1.3 million barrels rise in crude stocks within the same week also contributed to the falling prices.

Prices however corrected to the $68 per barrel mark after the Iran Nuclear talks failed to lead to the expected results going past $69 per barrel at the end of the pricing window on Thursday, 27^th May 2021.

Markets however remain bullish as demand recovery continues to shore up. The probable coming on stream of the Iranian supply following the easing of sanctions by the US limits some expectations but with the increased vaccinations in the US and Europe, traders remain positive for a rising demand in the coming weeks.

Gasoline and Gasoil prices as monitored on Standard and Poor’s global Platts platform show that price of the international commodities experienced marginal increases within the period. Gasoline experienced an increase of 1.05% in the period under assessment to close the window at $663.50 per metric tonne from an earlier $656.63 per metric tonne. Gasoil price also saw an increment of 2.66% within the period to close trading at $560.00 per metric tonne from the May first pricing-window's price of $545.50 per metric tonne.

Local Forex

Data collated by IES Economic Desk from the Foreign Exchange (Forex) market shows the Cedi depreciated marginally against the U.S. Dollar by 0.35% from the previous window's Gh¢5.75 to the current Gh¢5.77 to the US Dollar.

PROJECTIONS FOR JUNE 2021 FIRST PRICING-WINDOW

With the 3.50% increase in price of the International Benchmark- Brent crude together with the 1.05% increase in price of Gasoline, the 2.66% increase in Gasoil price, and the cedi depreciation of 0.35% against the US Dollar; IES predicts that OMCs in Ghana may increase fuel prices marginally at the pump due to these international market variables as we enter June 2021, particularly for those that maintained their prices at the pump from the first pricing-window of May through to the end of the second pricing-window.

However, due to the market leadership role played by GOIL and a few others, and with the aim of increasing market share, OMCs may opt to maintain the current prices at the pump.

For media engagement, kindly contact Fritz Moses on 0241681742 or Derick Xatse on 0240851221.

Signed:

Fritz Moses

Research Analyst, IES