Aussie energy shares dip. Brisbane petrol prices hit record high.

Energy market update

The Australian Institute of Petroleum reported the national average unleaded petrol price rose by 1.7 cents last week to 166.2 cents a litre.

The Brisbane daily average unleaded pump price hit a fresh record high today of 183 cents a litre, according to MotorMouth. And Melbourne daily unleaded petrol prices are on track to hit all-time highs later this week.

The Australian S&P/ASX 200 energy index tumbled 1.5 per cent last week to be down almost 6 per cent so far in November –the worst performing sector on the broader S&P/ASX 200 index.

What does it all mean?

• Shares of Aussie energy producers, such as Santos, Woodside Petroleum, Oil Search and Beach Energy have had a rough start to the week after oil prices sank on Friday. The Australian S&P/ASX 200 energy index tumbled 1.5 per cent last week to be down almost 6 per cent so far in November – the worst performing sector on the S&P/ASX 200 index.

• Global oil prices posted their biggest weekly drop since August on demand concerns as a fourth wave of Covid-19 infections renewed the prospect of lockdowns across Europe. Already Austria has announced a full lockdown and Germany’s Health Minister said mobility restrictions couldn’t be ruled out after cases hit a record high. And in Ireland and the Netherlands, people have been instructed to work from home. Oil demand is particularly sensitive to lockdowns because petroleum use for transportation accounts for two‑thirds of global oil consumption.

• Crude prices were also pressured by ongoing speculation of a co-ordinated release of crude oil from strategic reserves in the US, China, India and Japan – aimed at dampening rising gasoline prices. Worries about Chinese economic growth and its beleaguered property sector also likely contributed to the move lower in oil prices. Last week, the Brent crude oil price slid US$3.28 or 4 per cent to US$78.89 a barrel. And the US Nymex crude price fell by US$4.85 or 6 per cent to US$75.94 a barrel, down for a fourth straight week for the first time since March 2020.

• US crude oil prices have declined by around US$9 a barrel since hitting 7-year highs in late October. Goldman Sachs Commodity Strategists estimate that current market pricing implies a demand hit or supply shock equivalent to around 4 million barrels a day over the next three months. Strategists also argue that lower liquidity and lighter trading volumes in the oil market are exacerbating the move lower in crude prices, given the large current demand-supply market deficit.

• Commonwealth Bank Commodity Strategists expect OPEC and its allies (OPEC+) to continue to restrain crude supply when they next meet on December 2. Producers have struggled to lift output at the agreed rate in recent months with Nigeria and Oman output both hindered by operational issues. We therefore expect OPEC+ will decide to stick to its plan of adding 400,000 barrels a day in January 2022.

• In Australia, the good news for consumers is that declines in crude oil prices are finally passing through to global benchmark gasoline and domestic wholesale prices. Today, the Terminal Gate Price (TGP) sits at 150.8 cents per litre, continuing to ease from the 13-year high of 157.3 cents per litre on November 1.

• Of course, filling up the car with petrol is one of the single biggest weekly purchases for consumers. Using the Bureau of Statistics’ (ABS) Household Expenditure Survey and assuming the purchase of 35 litres of petrol per week, households spent around $232.68 on petrol last week, just below record highs of $237.20 in late October.

• Retail unleaded petrol prices remain elevated across Australia today. In fact, the average daily unleaded petrol price hit a record high of 183 cents a litre in Brisbane, according to real-time fuel app MotorMouth. Servos are charging as much as 193.9 cents a litre with the price hike underway, so motorists should top-up rather than fill up their tanks.

• Melbourne unleaded pump prices are averaging 177.3 cents a litre today and are likely to test the daily record high of 178.7 cents a litre later this week. Prices are hovering near 190 cents a litre in parts of the city, so drivers should shop around for cheaper fuel with some servos offering fuel as low as 154.9 cents a litre.

What do you need to know?

Weekly energy market update

• Last week the Brent crude oil price slid US$3.28 or 4 per cent to US$78.89 a barrel. The US Nymex crude price fell by US$4.85 or 6 per cent to US$75.94 a barrel, down for a fourth straight week for the first time since March 2020.

• The benchmark Singapore gasoline price dipped US$1.97 or 2.1 per cent to US$93.98 a barrel last week. In Aussie dollar terms, the Singapore gasoline price fell by $2.47 or 1.9 per cent to $129.20 a barrel or 81.26 cents a litre.

• According to the Australian Institute of Petroleum the national average unleaded pump price rose by 1.7 cents last week to 166.2 cents a litre. Weekly petrol prices hit record highs in Hobart (178.8 cent a litre). The smoothed gross retail margin hit a new 2-year low of 11.7 cents a litre.

• The national average wholesale (TGP) petrol price fell by 2 cents last week to 152.6 cents per litre. Today the TGP price sits at 150.8 cents per litre after hitting a 13-year high of 157.3 cents a litre on November 1.

• MotorMouth records the following average retail prices for unleaded fuel today: Sydney 159.6c/l; Melbourne 177.3c/l; Brisbane 183.0c/l; Adelaide 154.9c/l; Perth 171.1c/l; Hobart 179.2c/l; Darwin 169.3c/l and Canberra 171.6c/l.

Published by Ryan Felsman, Senior Economist, CommSec