Petrol prices set to rise further. Car prices lift.
Petrol Prices; Used vehicle market
Fuel prices: Due to a public holiday in Canberra today, the national average price of unleaded petrol will be released by the Australian Institute of Petroleum tomorrow.
Wholesale petrol price: CommSec estimates that the national average unleaded Terminal Gate Price (TGP) was up 1.6 cents last week to a 12-month high of 122.0 cents a litre. The terminal gate diesel price was estimated to be up 0.7 cents to 120.5 cents a litre.
Used car prices: Used vehicle prices rose 2.0 per cent last week with supply down 28.3 per cent.
Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. Used car price data is useful in gauging activity levels in the motor vehicle market.
What does it all mean?
• The big news in the oil market last week was the decision by OPEC+ producers to raise output by just 150,000 barrels a day in April rather than forecasts of 1.5 million barrels a day. Over the week Brent rose by 4.9 per cent with US Nymex up 7.5 per cent.
• The bottom line is that petrol prices will continue to lift as Australia is a net importer of refined petroleum product. At the same time that oil supply is restrained, there is optimism that the vaccine roll out will lead to countries emerging from lockdown, leading to greater movement of people and greater demand for crude. Over the weekend average retail unleaded pump prices touched $1.60 a litre in Melbourne – the highest level in almost 13 months. And prices have been above that level across large swathes of Sydney for more than a week.
• After falling over four per cent in the prior fortnight, used car prices rose two per cent last week. The researchers at Datium Insights say that stock levels continue to tighten. Global auto production is gradually recovering, although it will still take time for supply and demand to become more balanced.
What do you need to know?
Weekly petrol prices
• Last week, CommSec estimates that the national average unleaded Terminal Gate Price (TGP) was up 1.6 cents to 122.0 cents a litre. The terminal gate diesel price was up 0.7 cents to 120.5 cents a litre.
• Today, MotorMouth records the following average retail prices for unleaded fuel in capital cities: Sydney 152.9c/l; Melbourne 158.2c/l; Brisbane 137.5c/l; Adelaide 133.1c/l; Perth 128.1c/l; Hobart 136.50c/l; Darwin 131.90c/l; and Canberra 135.4c/l.
• Last week the key Singapore gasoline price rose by US$1.20 or 1.6 per cent to a 13-month high of US$74.30 a barrel. And in Australian dollar terms, the Singapore gasoline price rose by $3.01 or 3.2 per cent to a 12-month high of $96.38 a barrel or 60.62 cents a litre.
Weekly used vehicle market
• Datium Insights have reported the following results for the week to March 8:
After falling 4.2 per cent in the fortnight to March 1, prices increased last week (+2 per cent) with passenger cars (+4.1 per cent) and SUVs (+3.1 per cent) leading the increases
Supply was down significantly (-28.3 per cent) as stock continues to tighten in the market
Clearance rates were also down (-9.5 per cent)
Prices for the top 15 traded vehicles were mixed with the Toyota Corolla (+3.6 per cent) leading increases and the Isuzu D-MAX seeing the greatest decrease (-4 per cent)
Stock still remains considerably low
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.
• Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. Datium Insights and Moody’s Analytics also issue a monthly reading on used vehicle prices. The data assists in gauging the strength of a key component of consumer spending and provides insights on the Autos and components sector of the sharemarket.
What are the implications for investors?
• Last week the ASX-listed energy sector was amongst the best performers, lifting by 2.9 per cent. Given market fundamentals, oil prices have potential to lift further, driving up share prices of energy producers.
• But rising petrol prices serve as headwinds for consumer stocks. Filling up the car with petrol is the single-biggest weekly purchase for most families.
• Used car prices continue to lift in response to firm demand and a significant tightening of supplies. The Datium Insights-Moody’s Analytics Used Vehicle Price Index increased by 36.5 per cent on a year-ago basis in February. This is the highest rate of appreciation for a series that goes back to 1999.
• Higher used car prices serve to boost wealth levels and borrowing capacity.
Published by Craig James, Chief Economist, CommSec