Aussie petrol prices hit record high. Big oil cash splurge.

Energy market update

Oil prices continued to rise last week with Nymex crude at fresh 7-year highs and Brent crude at 3-year highs.

The Australian average weekly petrol price lifted 8.8 cents to a record high of 169.5 cents per litre.

Weekly energy market update

• The world’s biggest oil and gas companies report September quarter earnings results this week. European-listed heavyweights Royal Dutch Shell and TotalEnergies deliver their profit figures on Thursday with US supermajors Exxon Mobil and Chevron reporting the following day. Surging natural gas and crude oil prices combined with stronger refining margins and balance sheet discipline could see the energy giants deliver around US$30 billion of free cash flow in the quarter, according to Bloomberg estimates.

• The Australian S&P/ASX 200 energy index tumbled 4.3 per cent last week, dragged down by an 11.1 per cent fall in Whitehaven Coal shares. Chinese thermal coal prices slumped 15 per cent as authorities cracked down on “excessive profits” at coal firms and attempted to rein-in elevated prices amid power shortages and blackouts. Last week, shares of Santos, Oil Search and Beach Energy all fell by over 4 per cent with Woodside Petroleum shares 7.6 per cent lower.

• ASX-listed energy shares continue to lag the sharp rally in global crude oil prices amid coal and natural gas shortages in China, India and Europe with power generators switching from gas to oil and diesel. US crude oil rose for a ninth straight week – the longest stretch since 2015 – as OPEC+ producers only modestly increase supply, while US crude inventories dwindle. In fact, US Energy Information Administration data last week showed crude stocks at Cushing, Oklahoma fell to 31.2 million barrels, their lowest level in three years.

• Crude traders believe the rapid oil demand recovery and broader energy supply shock could drive down Cushing storage tank supplies even further with around 20 million barrels generally required to maintain normal operations. The last time this occurred was in 2014 when the US crude oil price was around US$100 a barrel. Should the upward momentum in crude oil prices continue, this could spur a ‘catch-up’ rally in Aussie energy stocks at the back-end of 2021.

• Last week the benchmark Singapore gasoline price lifted to a 7-year high of US$102.50 a barrel. As a net importer of refined petroleum, the cost of fuel continues to increase for Aussie petroleum retailers. In turn, servos are passing on higher costs to consumers at the pump. According to MotorMouth, East Coast retail unleaded petrol prices hit fresh record highs in Sydney (173.8 cents a litre), Melbourne (178.7 cents a litre) and Brisbane (180.2 cents a litre) on October 19-20, 2021. And prices are above 180 cents a litre in Adelaide today, so motorists should ‘top up’ rather than ‘fill up’ and shop around for the best deal.

• Petrol prices lifted 5.5 per cent in the September quarter and are expected by Commonwealth Bank (CBA) Group economists to make a 0.2-0.3 percentage point contribution to the headline Consumer Price Index (CPI) when released on Wednesday.

Weekly oil market data

• The Brent crude price rose for the seventh straight week, up by US67 cents or 0.8 per cent to US$85.53 a barrel after touching 3-year highs of US$86.10 a barrel on Thursday. And the US Nymex crude price rose for the ninth straight week, up by US$1.48 or 1.8 per cent to US$83.76 a barrel, just below 7-year highs.

• The benchmark Singapore gasoline price rose by US$3.26 or 3.3 per cent to a 7-year high of US$102.50 a barrel last week. In Aussie dollar terms, the Singapore gasoline price lifted $3.38 or 2.5 per cent to an 8-year high of $137.09 a barrel or 86.22 cents a litre.

• The national average wholesale (TGP) petrol price rose by 4 cents last week to 153 cents per litre. Today the TGP price sits at a fresh 13-year high of 154.6 cents per litre.

• The national average unleaded pump price rose by 8.8 cents last week – the most in 4 months – to a record high of 169.5 cents a litre. There were record highs in average terms in Sydney (172.8 c/l), Melbourne (176.1 c/l) and Brisbane (178.6 c/l) in the past week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 172.2c/l; Melbourne 172.8c/l; Brisbane 175.7c/l; Adelaide 180.5c/l; Perth 169.6c/l; Hobart 170.2c/l; Darwin 165.5c/l and Canberra 166.0c/l.

Published by Ryan Felsman, Senior Economist, CommSec