Choppy trade in crude oil futures yesterday coupled with strength in the US dollar and weak manufacturing data for June weighing on sentiment in the oil market will see local petrol prices go up by 40 cents a litre (retail) and diesel by 30 cents a litre (wholesale) as of today.
The increase, which sees fuel closing in on the N$11 per litre mark, takes effect even though fuel pump prices in Namibia are subsidized and crude prices are falling.
The new Walvis Bay pump prices are N$10.99 per litre for 95 octane unleaded petrol, N$10.82 per litre for diesel 500ppm and N$10.92 per litre for diesel 50ppm.
According to Mines and Energy Minister, Obeth Kandjoze, the dollar index was pushing higher in early yesterday trade, up 1.3 percent, amid Greece’s tenuous move toward an accord with its international creditors.
“Because oil is priced in dollars, fluctuations in the dollar can influence the price of crude. The dollar index was up 1.3 percent, while the euro shed nearly 2 percent against the greenback. Oil, denominated in the U.S. currency, becomes less affordable to holders of other currencies such as Namibia when the dollar strengthens,” explained Kandjoze.
Oil fell after United States Federal Reserve Governor, Jerome Powell, said there could be two interest rate hikes this year, which pushed the dollar higher. “A global surplus of oil continues to put downward pressure on crude prices. Market observers indicated that the deadline for the Iranian nuclear deal on June 30 may result in more pressure on oil prices as it paves the way for more Iranian crude exports,” added Kandjoze.
Meanwhile, according to Mohamed Elharari, a Tripoli-based spokesman for Libya’s state-run National Oil Corp, that country may double output to 800 000 barrels a day by next month.
Also, according to the Saudi Arabia Oil Minister, Ali-Al Naimi, Saudi Arabia, OPEC’s biggest member, has further registered its willingness and readiness to produce more oil if demand rises, as it currently has 1.5 million to 2 million barrels a day of spare capacity.
“The ministry, however, always supports a fuel price that is kept at the lowest possible level not to disrupt the transportation costs and thus the entire imported commodity price in Namibia. Through the National Energy Fund, it always subsidizes in the event of huge under-recoveries, and this month it will once more bear the full cost of the resultant under-recoveries recorded,” remarked Kandjoze.