Signs point to cheaper petrol soon

Hawke's Bay Today - - Business - Liam Dann

The odds on cheaper petrol prices for the Christ­mas hol­i­days just got bet­ter as OPEC talks in Vienna ended with­out a deal on oil pro­duc­tion cuts.

Crude oil prices slumped as much as five per cent in ini­tial trad­ing yesterday.

The crude oil price surged so much this year it sparked fears about petrol head­ing to­wards $3 a litre. Then it crashed so hard we are now more likely to see it be­low $2 a litre by Christ­mas.

Oil prices peaked in early Oc­to­ber, which co­in­cided with a fall in the kiwi dol­lar and new fuel taxes.

But in a dra­matic mar­ket shift — which caught many traders off guard — oil prices have slumped in the past two months.

They have fallen as much as one third since a peak on Oc­to­ber 3.

The kiwi dol­lar has also bounced back — up about 7 per cent since the start of Oc­to­ber.

Drivers have al­ready en­joyed 12 petrol price cuts since a peak in Oc­to­ber, but more will come, says mar­ket an­a­lyst David Lewis of Mil­ford As­set man­age­ment.

“Part of the rea­son that the price got so high was con­cerns about sanc­tions on Iran and a re­duc­tion of sup­ply out of Iran,” he said. “Then more re­cently we’ve seen Trump en­cour­ag­ing Saudi Ara­bia to con­tinue pro­duc­ing at a higher level to try and keep that oil price down.”

Trump wants a lower price to sup­port the US econ­omy and had lever­age in the wake of rev­e­la­tions about Saudi in­volve­ment in the mur­der of jour­nal­ist Ja­mal Khashoggi, Lewis said.

But a 30-40 per cent swing in the oil price as we’d seen in the past few months was un­usual, he said.

Af­ter the OPEC meet­ing, Saudi En­ergy Minister Khalid Al-Falih said he wasn’t con­fi­dent of an agree­ment af­ter dis­cus­sions of a 1 mil­lion- bar­rel- a- day out­put re­duc­tion con­cluded un­re­solved.

That left the mar­ket dan­gling in un­cer­tainty al­though non-OPEC al­lies were to join for fur­ther talks.

Saudi Ara­bia, the largest pro­ducer in the car­tel, is seek­ing to walk a fine line be­tween pre­vent­ing a sur­plus and ap­peas­ing Pres­i­dent Don­ald Trump.

While min­is­ters met in OPEC’s Vienna head­quar­ters on Wed­nes­day, Trump tweeted that the “world does not want to see, or need, higher oil prices!”

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