Petrol prices lift the most in 13 weeks

Weekly Petrol Prices; COVID-19 survey; Chinese economic data

Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 8.2 cents last week – the biggest increase in 13 weeks – to 111.3 cents a litre. But unleaded pump prices are beginning to ease in Sydney, Melbourne, Brisbane and Adelaide with the retail petrol price discounting cycle commencing. Motorists should fill up next week as prices will be lower.

COVID-19: Survey of households: According to the Australian Bureau of Statistics (ABS), “the proportion of people reporting they had a job had increased to 64.2 per cent in early May, up 0.8 percentage points over the month from the lowest point in the first week of April. The proportion of people indicating they had worked paid hours also increased by 3.2 percentage points to 59 per cent.”

China home prices: Average new home prices in China’s 70 major cities rose by 0.5 per cent in April from the prior month, following a 0.1 per cent increase in March. On an annual basis, home prices picked up 5.1 per cent in April, compared with March’s 5.3 per cent lift, according to Reuters estimates.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The Chinese data is important for exporters, especially rural producers, consumer goods, mining and energy companies.

What does it all mean?

• Last week national average retail unleaded petrol prices rose by 8.2 cents a litre – the biggest weekly gain in over three months. But prices have begun to ease with the retail discounting cycle commencing on Australia’s East Coast. Unleaded pump prices in Sydney’s West are already averaging around 98 cents a litre. Motorists elsewhere in the Harbour City – where petrol prices are currently averaging around $1.13 a litre – should hold off filling up until prices come down further next week.

• Similarly, Brisbane unleaded petrol prices are also averaging around $1.13 a litre today with the cheapest fuel located at Sunnybank Hills at around $1.05 a litre. So drivers should top-up rather than fill up with bowser prices set to fall below $1 a litre within the next week.

• Unleaded pump prices peaked at $1.17 a litre – on average – in Melbourne on Friday and have also begun to ease. Today, motorists will find slightly cheaper fuel at around $1.11 a litre in Coburg, Thomastown, Wantima and Clarinda. But motorists should also refrain from filling up until prices are lower next week.

• Adelaide’s petrol price cycle continues to confound analysts. Since late April, average pump prices have twice peaked at around $1.16-$1.17 a litre just four days after hitting the cycle bottom. Today, average retail pump prices are averaging around 98 cents a litre, but where prices trough is anyone’s guess.

• So can we expect fuel prices to lift from June? It certainly appears that way with the global oil market continuing to rebalance as countries emerge from virus lockdowns. US crude oil prices rose above US$30 a barrel this morning for the first time in two months. And last week the US Nymex price gained 19.7 per cent to US$29.43 a barrel while the global Brent crude benchmark price lifted by 5.2 per cent to US$32.50 a barrel. Both major oil contracts rose for a third successive week.

• And the Singapore benchmark gasoline price – the largest component of fuel prices paid by Aussie motorists – increased by 15.4 per cent or US$4.50 a barrel to a 9-week high of US$33.80 a barrel last week.

• OPEC Secretary General Mohammad Barkindo said on Friday, “Here at OPEC we remain cautiously optimistic that the worst is behind us.” The OPEC chief also signalled a willingness to consider further measures when producers meet in June with the existing 9.7 million barrels a day production cut agreement – which started on May 1 – to be gradually reduced after two months.

• The International Energy Association (IEA) expects global crude inventories to fall by around 5.5 million barrels per day in the second half of this year, supported by deep production cuts in the US. Shale drillers have idled rigs and shutdown wells. Baker Hughes data on Friday continued to show a collapse in US drilling activity, with the number of active oil rigs falling by 34 over the week to 258 – the lowest level since 2009.

• And some of the biggest US producers – Chevron, ConocoPhillips and Continental Resources – have already reduced crude production by 758,000 barrels per day, according to Bloomberg estimates. US Energy Secretary Dan Brouillette has estimated that the US will reduce production by around 2 million barrels per day this year.

• The fragile recovery in global oil demand is beginning to take shape. BP Chief Financial Officer Brian Gilvray said global oil demand fell by between 25-30 million barrels per day at the peak of the COVID-19 crisis, but added, “We’ve now seen demand surge back” in the past week as motorists get back on the road as economies begin to reopen. And the IEA expects oil demand this year to fall by 8.6 million barrels per day, lower by 690,000 barrels per day than the decline it forecast last month. It expects non-OPEC supply to fall by 3.2 million barrels per day.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 8.2 cents to 111.3 cents a litre. The metropolitan price lifted by 9.9 cents to 111.5 cents a litre and the regional price was up by 4.6 cents to 110.9 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 9.1 cents to 113.6 c/l), Melbourne (up by 18.1 cents to 111.7 c/l), Brisbane (up by 5.5 cents to 116.0 c/l), Adelaide (up by 9.1 cents to 108.3 c/l), Perth (up by 4.7 cents to 102.8 c/l), Darwin (down by 2.0 cents to 112.8 c/l), Canberra (up by 0.3 cents to 101.6 c/l) and Hobart (down by 0.5 cents to 120.9 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from a record high 24.86 cents a litre to 23.74 cents (24-month average: 13.9 cents a litre).

• The national average diesel petrol price fell by 0.6 cents to 119.6 cents a litre over the past week. The metropolitan price fell by 0.7 cents to 118.2 cents a litre and the regional price was down by 0.5 cents to 120.7 cents a litre.

• Last week the national average wholesale unleaded petrol price (terminal gate or TGP) was up by 5.4 cents to 93.9 cents per litre. Today, the average unleaded TGP stands at 94.8 cents a litre, up by 2.7 cents over the week. The terminal gate diesel price stands at 96.8 cents a litre, down by 1.6 cents over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 112.7c; Melbourne 116.2c; Brisbane 113.4c; Adelaide 97.6c; Perth 95.8c; Canberra 101.7c; Darwin 111.9c; Hobart 120.7c.

• The key Singapore gasoline price rose by 15.4 per cent or US$4.50 a barrel to a 9-week high of US$33.80 a barrel last week. In Australian dollar terms, the Singapore gasoline price rose by $7.49 or 16.70 per cent to a 9-week high of $52.36 a barrel or 26.16 cents a litre.

What is the importance of the economic data?

• Weekly petrol prices data 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.

• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

• The Australian Bureau of Statistics (ABS) is providing weekly updates on the coronavirus impacts on job situation, health services, health precautions, social distancing, household stressors, support network, lifestyle changes.

What are the implications for investors?

• The crude oil market is rebalancing as COVID-19 restrictions are eased – boosting demand – and producers respond to the global supply glut by aggressively reducing production. Crude oil prices have recovered by around 60 per cent in the past 3 weeks with prices likely to stabilise above US$30 a barrel in the near term. So Aussie motorists should take advantage of unleaded pump prices below $1 a litre as prices may lift to between $1.20 and $1.30 a litre at the peak of the next retail petrol price cycle in the coming weeks.

• That said, downside risks remain. As economies reopen and lockdown restrictions ease, the nascent recovery in crude oil prices could be still be threatened by secondary virus infections or a worsening of the pandemic. And another threat looms large. Tropical Storm Arthur is hovering off the coast of North Carolina and the hurricane season could potentially impact US oil production in the coming months.

• There may be some light at the end of the tunnel for beleaguered Aussie businesses and workers. While there was an historic plunge in jobs and hours worked in April – due to virus lockdowns – additional ABS survey data issued today shows a tentative improvement in labour market conditions at the beginning of May as state governments ease restrictions. Government statisticians said, “That the proportion of people in the panel reporting they had a job had increased by 0.8 percentage points over the month, from the lowest point in the first week of April, up to 64.2 per cent. The proportion of people indicating that they had worked paid hours also increased, by 3.2 percentage points, up to 59.0 per cent.”

• Of course, with social distancing measures in place, the ABS reported that “46 per cent of all Australians who were working in late-April to early-May said they were working from home, with one in six (17 per cent) increasing their number of hours working from home since COVID-19. Women were more likely than men to have been working from home (56 per cent compared with 38 per cent).”

Ryan Felsman, Senior Economist, CommSec