East Coast petrol prices ease

Weekly Petrol Prices

Petrol: According to data from the Australian Institute of Petroleum, the terminal gate or wholesale unleaded petrol price rose by 2.5 cents last week to 136.2 cents a litre. In the absence of official data due to the Canberra public holiday today, we estimate that motorists should be paying around $1.50 a litre at the petrol pump.

East Coast petrol prices fall: According to data from MotorMouth and Informed Sources, unleaded petrol prices fell 8-11 cents a litre in Melbourne, Sydney and Brisbane last week.

The petrol figures have implications for retailers, especially petrol marketing groups.

What does it all mean?

• The petrol discounting cycle continued on the East Coast last week. Unleaded pump prices fell 8-11 cents a litre in Melbourne, Sydney and Brisbane, according to independent data from MotorMouth and Informed Sources. But the discounting cycle ended in Adelaide on Wednesday and prices lifted 25 cents a litre from the lows.

• In further good news for Aussie motorists, global oil prices fell by the most in six months last week. Over the week, the Brent crude price fell by 4.9 per cent to US$68.69 a barrel and the US Nymex price fell by 6.6 per cent to US$56.07 a barrel – its worst performance since December 21.

• Escalating trade tensions between the US and China, including the Trump Administration’s blacklisting of Huawei Technologies’ access to key US components, pushed the US Nymex price down by 5.7 per cent on Thursday. Investors fretted about the potential impact of the trade feud on global growth and oil demand.

• That said, we expect the Brent crude oil price to remain around US$70 a barrel in the near term. And much will depend on the OPEC-Russia meeting scheduled for 25-26 June. While it is expected that producers will agree to retain supply discipline, political risks in the Persian Gulf are growing, constraining crude cargoes. The US has imposed sanctions on Iran and Venezuela, while Canada has cut production, driving up the price of fuel.

• Demand for US gasoline is expected to increase as the summer ‘driving season’ kicks off. And a potential reduction in US Permian Basin shale production could provide additional support for oil prices. In fact, the number of US oil rigs in operation fell by 5 to 797 last week, the lowest level since March 2018, according to Baker Hughes.

• The Singapore gasoline price fell by $6.63 or 5.8 per cent last week to $108.45 a barrel or 68.21 cents a litre. It was the biggest weekly fall in percentage terms in almost six months.

• The terminal gate or wholesale unleaded petrol price in Australia is currently 136 cents a litre. Add to that a gross retail margin of around 12 cents a litre and this suggests that motorists should be paying around 150 cents a litre at the petrol pump.

What do the figures show?

Petrol prices

• MotorMouth records the following average retail prices for capital cities today: Sydney 144.9c; Melbourne 137.6c; Brisbane 149.7c; Adelaide 159.8c; Perth 137.3c; Canberra 146.9c; Darwin 140.1c; Hobart 154.6c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 136.2 cents a litre, up 2.5 cents over the week. The terminal gate diesel price stands at 142.1 cents a litre, up by 2.0 cents over the past week.

• Last week, the key Singapore gasoline price fell by US$5.80 or 7.2 per cent to US$74.70 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $6.63 or 5.8 per cent last week to $108.45 a barrel or 68.21 cents a litre. It was the biggest weekly fall in percentage terms in almost six months.

What is the importance of the economic data?

• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

What are the implications for interest rates and investors?

• National petrol prices are likely averaging around $1.50 a litre. While the retail discounting cycle is benefiting motorists on the East Coast, the abrupt end to the cycle in Adelaide has seen pump prices averaging almost $1.60 a litre.

• Falling Asian regional gasoline benchmarks imply a further fall in Aussie pump prices, but the wholesale terminal gate petrol price is still lifting. Either way, motorists are encouraged to seek out the best deals at the bowser by using real time pricing apps, such as MotorMouth and MyNRMA.

• Global crude oil prices are volatile at the moment due to rising geo-political risks. Fundamentally, global crude supply is constrained, supporting prices. But downside risks are growing. US crude production is already at record highs, growing trade tensions may weigh on global oil demand and OPEC discipline may weaken later in the year amid escalating Persian Gulf tensions.

• CommSec expects a rate cut to be delivered in June while another could occur in August. Low inflation, modest wage growth and an uncertain consumer backdrop means an extended period of record low interest rates.

Published by Ryan Felsman, Senior Economist (Author) CommSec