Kiwi motorists braced for petrol price rise as oil jumps on Saudi attacks

Monday, 16 September 2019

US secretary of state says there is no evidence drones were launched from Yemen.

Motorists appear in line for a 5 cent to 10c rise in the price of petrol later this week, after oil prices lost some of their dramatic morning gains during afternoon trading on Monday.

But it may be a day or two before the direction of oil prices and the impact on petrol at the pump become clearer.

Brent crude was trading up US$6 a barrel at just over US$66 at 3pm on Monday, in the wake of Saturday's drone attacks on Saudi Arabian oil facilities.

If that price increase proves to be sustained, motorists could expect petrol prices to rise by about 6c a litre.

* Z Energy tips petrol could rise 5c to 10c in response to Saudi attacks

* Saudi Arabia oil sites hit by drone strikes

Motorists may get a sense of how much petrol prices may rise on Monday.

* What we are paying for when we buy petrol**

OilPrice.com reported that the price of Brent crude initially jumped 20 per cent when the oil market reopened on Monday, before giving up about half of those gains.

But there may be continued volatility ahead.

Prices are spiking because of the attacks on Saudi Arabia's oil facility at Abqaiq and its Khurais oil field, that cut Saudi oil production by more than half.

Damage from the attacks is still being assessed and there are fears the attacks could lead to more instability in the Middle East.

Z Energy had speculated on Sunday that the price of oil could go up by US$5 to US$10 a barrel in response to the attacks, which could translate into a 5c to 10c price-rise at the pumps.

But analyst Platts had forecast on Monday that the price of Brent Crude could 'test the high US$70s' and said the price 'could move higher still if Saudi output is curtailed for a more substantial period'.

Speaking just before the oil markets reopened on Monday, Z Energy chief executive Mike Bennetts noted reports that Saudi planned to quickly restore a third of its lost oil output.

There are fears that Saturday's drone attacks on Saudi oil facilities could push up fuel prices to over 100 US dollars a barrel.

'Every little bit they bring back on will moderate the price increase.'

The drone attacks on the world's largest oil processing facility at Abqaiq did not sound as though they had caused terminal damage, Bennetts said.

'We have got to see what the markets do. They tend to 'overshoot' on news; they are way more bullish on good news, and way more bearish on bad news, so we want to make sure we factor that into how we make our decisions and we'll see what happens day by day.'

Some analysts have talked of oil topping US$100 a barrel if Middle East tensions grow further, but a jump to that level would likely be relatively shortlived as it would stimulate significant extra supply from North American shale oil producers.

A barrel of oil equals about 159 litres, which means each sustained US$10-rise in the price of a barrel of oil could be expected to push up the price of petrol, diesel, jet fuel and other derivatives by an average of about 10 NZ cents a litre.

No-one knows yet exactly how long it will take Saudi Aramco's Abqaiq oil processing facility to return production to normal.

Bennetts said many countries including the United States had strategic petroleum reserves that were held in reserve for 'exactly a situation like this'.

'So I think if you did see significant price increases, the US would release from the reserve and the Chinese would probably stop buying, in my view, as they have some very good inventory right now – record inventories last time I looked.'

Z offered on Monday to display all its fuel prices, including the post-discounted price of fuel, on its roadside boards in response to a draft 'market study' into competition issues in the industry published by the Commerce Commission last month.

But the company said in a submission that the commission's draft report included inaccuracies, including about Z's profitability.

BP spokesman Gordon Gillan said on Sunday that its prices were reflective of the oil price in international markets among other influencing factors 'so it is possible there could be an impact on local prices later this week'.

BP did not at the time want to speculate further. 'We review our BP Connect prices every day so our prices are as competitive as possible,' he said.

Mobil spokesman Rob Fitzgerald said it chose 'not to speculate on future fuel prices due to the number of factors involved'.