Fuel prices are anticipated to decrease at the pumps as the price of crude oil remains close to its lowest in three months, and the worry about the Israeli-Palestinian conflict affecting the broader region diminishes.
Despite the Australian National Roads and Motorists’ Association noting an increase of 21.9 cents per litre in average regular unleaded prices to the peak of the cycle by Saturday, it projects that pump prices will drop to an average of 180.5 cents per litre in the ensuing four to five weeks. Last week, the average price in Sydney was recorded at 216.3 cents.
NRMA representative Peter Khoury noted that cities like Sydney are experiencing peak cycle prices, with the reduction in geopolitical tensions in the Middle East.
Khoury mentioned that the regional conflict had raised concerns about soaring oil prices, but such a situation hadn’t occurred. With these issues easing, Khoury mentioned a return to “business as usual”, with some minor price variations, mirroring the market state when the conflict began.
As per Bloomberg, oil prices stayed near a three-month low on Wednesday, amid projections of a drop in US gasoline usage, signaling a worsening demand outlook.
The global benchmark, Brent crude, saw a slight rise toward $82 a barrel after a 4.2% drop on Tuesday, while West Texas Intermediate hovered near $77. A US government report anticipates a 20-year low in per-capita gasoline consumption next year, potentially influenced by higher pump prices and inflation reducing non-essential travel.
Despite this, crude stockpiles at Cushing, Oklahoma, saw a 1.1 million-barrel rise last week, as reported by the American Petroleum Institute, which, if confirmed, would be the largest increase since June. The Energy Information Administration is set to release updated data on November 15.
OPEC+ remains optimistic about the demand forecast as it readies for its next meeting at November’s end. During this session, leaders from Saudi Arabia and Russia may consider continuing voluntary output cuts into 2024.
Additionally, concerns about China’s economic strength, the world’s top crude importer, and uncertainties about the US Federal Reserve’s interest rate hikes persist, following suggestions from officials that efforts to curb inflation may continue.
In terms of supply, Russian oil exports are at a near four-month peak, while US crude inventories rose by nearly 12 million barrels last week.
This pessimistic view is echoed in the futures market, where the immediate spread for West Texas Intermediate is just 10 cents a barrel, a significant decrease from over $1 last month, indicating a much less tight market than expected. Warren Patterson, the head of commodities strategy at ING Groep, remarked to Bloomberg that the market is not as constrained as many had predicted, with concerns over potential disruptions in Middle Eastern supply easing and overall market sentiment becoming more negative.