Petrol and diesel prices to go down in July

Prices are about 2 fils be­low those seen for last year

The National - News - Business - - The Region - LeAnne Graves lgraves@then­ational.ae

Fuel costs for cars will be 5 per cent cheaper for UAE res­i­dents start­ing on Satur­day as petrol prices fall for a fourth con­sec­u­tive month amid a weak oil mar­ket. The Min­istry of En­ergy an­nounced yes­ter­day that con­sumers will pay Dh1.86 a litre for Su­per 98, a 5.1 per cent drop from last month’s fig­ure of Dh1.96.

Spe­cial 95 will decline 5.41 per cent to Dh1.75 from Dh1.85, and E Plus will cost Dh1.68, down from June’s Dh1.78. Diesel prices will drop to Dh1.84, a 3.16 per cent slide from last month.

The lat­est petrol prices are, on av­er­age, 2 fils be­low prices seen for the same month last year.

The cost of petrol in the UAE has fluc­tu­ated for nearly two years, since the Min­istry of En­ergy be­gan lib­er­al­is­ing fuel prices us­ing “bench­mark prices” which have not been pub­licly dis­closed.

Fluc­tu­a­tions in the oil mar­ket im­pact the price of petrol and diesel as the two are by-prod­ucts of crude. The price of Brent crude, the in­ter­na­tional bench­mark, has fallen this month, hit­ting its low­est point of the year last week at US$43 a bar­rel.

The main prob­lem is the mar­ket needs to swal­low all of the ex­cess sup­ply still find­ing its way into the sup­ply chain, said Eu­gene Lin­dell, an oil mar­ket an­a­lyst at JBC En­ergy con­sul­tants. This has thrown the mar­ket into a con­stant con­tango, or where the spot price is lower than the for­ward price. More oil from the United States as well as Nige­ria and Libya is putting pres­sure on the mar­ket. “Pro­duc­tion will still in­crease for a few months as there’s a lag ef­fect,” Mr Lin­dell said.

Look­ing at the for­ward curve, it seemed as though con­tango was be­ing re­versed. “Around the end of next year, the prices tipped to back­war­da­tion and then was nearly flat be­fore heading into con­tango again,” he said. “Now it’s just more or less con­stant con­tango and that’s a sign that the mar­ket is in a bear mode right now.” Opec mem­bers and 11 non-mem­bers, in­clud­ing Rus­sia, agreed in May to ex­tend out­put cuts by 1.8 mil­lion bar­rels a day into next year. Opec mem­bers Nige­ria and Libya were ex­empt from the agree­ment.

De­spite re­cent cut­backs in oil pro­duc­tion by Opec and oth­ers, pro­duc­ers are strug­gling to sta­bilise prices, with US shale and other sources adding to the over­sup­ply, ac­cord­ing to the Lon­don-based in­vest­ment man­age­ment firm Sun Global In­vest­ments.

“It’s dif­fi­cult to be bullish about oil prices in the medium term,” said Mi­hir Ka­pa­dia, Sun Global’s chief ex­ec­u­tive and founder.

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