Oil prices soar: Sydney petrol prices hit record high

Oil market update; Used car prices

What happened? Last week, the Brent crude price jumped US$7.52 a barrel or 11.5 per cent to US$72.70 a barrel. And the US Nymex price added US$6.42 a barrel or 10.3 per cent to US$68.74 a barrel. It was the biggest percentage gain for both prices since June 2020. According to data from the Australian Institute of Petroleum, the Sydney average price of unleaded petrol rose by 10.5 cents a litre last week to a record high 166.5 cents a litre (the previous high was 163.9 for the week of July 13, 2008).

Implications: Crude oil prices are surging in anticipation of supply disruptions after Hurricane Ida forced the shutdown of production in the US Gulf of Mexico. Major producers, such as BP, Royal Dutch Shell and Chevron have cut at least 91 per cent of crude output so far as the storm heads towards key US offshore oilfields. The near-term lift in crude oil prices could support the share prices of ASX-listed energy producers.

Other data: Used vehicle prices rose by 4.4 per cent last week, supply fell by 2.6 per cent due to lockdowns in Sydney and Melbourne, according to Datium Insights.

Movements in energy prices can affect consumer spending, and in turn, prospects for retailers. Used vehicle price data provides a guide to supply and demand for companies in the auto and components sector.

What does it mean?

• Global oil prices surged by as much as 11.5 per cent last week – the biggest percentage gain since June 2020 – on US supply concerns. Major oil producers cut production as Hurricane Ida headed towards key US oilfields in the Gulf of Mexico. BP, Royal Dutch Shell and Chevron shut-in at least 91 per cent of crude output over the weekend, with more than 1.65 million barrels a day of output already halted so far, according to the US Bureau of Safety and Environmental Enforcement (BSEE). Offshore wells and platforms in the US Gulf Coast account for about 17 per cent of total US crude production, while over 45 per cent of total US refining capacity lies along the Gulf.

• Another factor supporting crude oil prices has been the weaker greenback. On Friday, US Federal Reserve Chair Jerome Powell suggested the central bank would take a cautious approach to the slowing or tapering of its asset purchases. While a paring of emergency monetary policy stimulus is expected later this year, Jerome Powell said that policymakers aren’t in a rush to raise official interest rates. Following these comments, the US dollar (USD) declined, boosting the appeal of commodities priced in the currency, such as crude oil.

• The upward pressure on oil prices could support the share prices of ASX-listed energy producers this week. Another consideration for energy investors is the gathering of OPEC and its allies (OPEC+) on Wednesday. The meeting takes place at a time when the crude demand outlook is being clouded by surging global Covid-19 Delta variant infections. That said, US gasoline demand has been solid during the summer ‘driving season’ and reports out of top importer, China, suggest that it has supressed its latest virus outbreak with street traffic increasing.

• On the supply side, the likelihood of an imminent revival of crude supplies from Iran has decreased, as nuclear talks with the US stall. On Wednesday, OPEC+ is expected to reaffirm its previously announced agreement to increase its crude production in monthly increments of 400,000 barrels a day through to late 2022. The lift in output follows the restoration of about 45 per cent of shuttered production at the beginning of the pandemic.

• So what does this mean for Aussie motorists? Upward pressure on international crude and imported refined petroleum prices are likely to keep domestic petrol prices elevated. Last week the benchmark Singapore gasoline price rose by US$4.75 or 6.3 per cent – the most in 4½ months – to US$80.45 a barrel last week. And in Aussie dollar terms, the Singapore gasoline price lifted $4.88 or 4.6 per cent – the most in 9 weeks – to $111.01 a barrel or 69.82 cents a litre.

• In good news for motorists, South-East Queensland unleaded petrol prices continue to ease with even cheaper fuel expected this week. Brisbane’s average retail unleaded petrol price is 144.6 cents a litre today, according to real-time fuel app MotorMouth. Pump prices are as low 134 cents a litre in Brisbane’s South-Eastern suburbs, such as Underwood and Kuraby. Motorists should fill up their tanks this week.

• In Sydney, unleaded fuel prices remain as high as 177.9 cents a litre in some suburbs today, according to MotorMouth. Retailers continue to defend their margins as the ongoing lockdown reduces demand for petrol. Sydney’s average wholesale (TGP) petrol price stands at 135.9 cents a litre today, remaining well below the city’s average retail unleaded petrol price of 165.3 cents a litre, a mark-up of almost 30 cents a litre. And according to data from the Australian Institute of Petroleum, the Sydney average price of unleaded petrol rose by 10.5 cents a litre last week to a record high 166.5 cents a litre (the previous high was 163.9 for the week of July 13, 2008).

• In Melbourne today the average retail unleaded petrol price is 146.5 cents a litre, according to MotorMouth, with prices down just 22 cents a litre so far during the current elongated four-week retail discounting cycle. Some retailers are selling fuel below 140 cents a litre, so drivers should shop around for the best deal before filling up.

• And in a sign that extended lockdowns in Sydney and Melbourne are impacting used car supply and prices, used car prices rebounded by 4.4 per cent nationwide last week, according to Datium Insights. Supply was down by 2.6 per cent due to lockdowns with clearance rates 3.0 per cent lower. Demand for second hand Toyota Landcruiser Prados increased ahead of September school holiday road trips with prices up 6.9 per cent, the biggest lift across the top 15 traded used vehicles over the week ended August 30.

What do you need to know?

Weekly oil market update

• Last week, the Brent crude price jumped US$7.52 a barrel or 11.5 per cent to US$72.70 a barrel. And the US Nymex price added US$6.42 a barrel or 10.3 per cent to US$68.74 a barrel. It was the biggest percentage gain for both prices since June 2020.

• The benchmark Singapore gasoline price rose by US$4.75 or 6.3 per cent – the most in 4½ months – to US$80.45 a barrel last week. In Aussie dollar terms, the Singapore gasoline price lifted $4.88 or 4.6 per cent – the most in 9 weeks – to $111.01 a barrel or 69.82 cents a litre.

• Last week the national average price of unleaded petrol rose by 0.7 cents to 152.8 cents per litre (c/l), according to the Australian Institute of Petroleum. The Sydney average price of unleaded petrol rose by 10.5 cents a litre last week to a record high 166.5 cents a litre.

• The national average wholesale (TGP) petrol price fell by 2.0 cents last week to 135.8 cents per litre, where it stands today.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 165.3c/l; Melbourne 146.5c/l; Brisbane 144.6c/l; Adelaide 135.4c/l; Perth 138.9c/l; Hobart 155.6c/l; Darwin 152.0c/l and Canberra 152.1c/l.

Weekly used vehicle market – August 30

• Datium Insights have reported the following results for the week to August 30:

Used vehicle prices were up (+4.4 per cent) with repossessed vehicles (+21.4 per cent) leading the increases.

Supply fell by 2.6 per cent due to lockdowns in Sydney and Melbourne.

Clearance rates fell 3.0 per cent.

Prices for the top 15 traded vehicles were mostly higher with the Toyota Landcruiser Prado (+6.9 per cent) seeing the largest increase, but the Holden Commodore (-4.1 per cent) saw the biggest fall in prices.

And used car stock still remains considerably low.