Global Oil Prices Trading Below USD 100 Per Barrel; What Does This Mean For Kenya?

Crude oil prices crumbled on Wednesday 13^th July staying below the USD 100 per barrel mark amidst China curbs.

On the Intercontinental Exchange, the September Brent contract was at 11,750.26 shillings per barrel, down 0.08 percent from the previous close. The August contract of West Texas Intermediate was down 0.15 percent at11,311.74 shillings a barrel.

Brent futures settled below 100 per barrel the previous day, falling almost 7 percent low. This was majorly attributed to the fresh lockdowns in several Chinese cities due to rising Covid-19 cases.

Meanwhile, Brent prices were also affected by the rise of crude stock in the US. Data by American Petroleum Institute shows that US crude inventories rose about 4.8 million barrels for the week ended 8 July.

At the same time, gasoline inventories increased by 3 million barrels and distillate stocks rose by about 3.3 million barrels.

Additional reports by OPEC forecasting a slowdown in oil demand by 2.7 million barrels per day in 2023 also weighed on the prices of the commodity.

The fall in crude oil prices could be a positive projection for Kenya, as the country imports almost 85 percent of its energy requirements.

Domestic retail prices of fuel in the country are still high and are expected to be reviewed on 14^th July 2022.  On Wednesday 13^th July, petrol sold for 159.12 shillings, while diesel at 140 shillings.

In a statement dated June 14, 2022, EPRA stated that the average landing cost for importing super petrol increased by 5.95 percent while diesel increased by 10.90 percent and kerosene decreased by 0.34 percent.

Meanwhile, other crude oil products such as cooking oil are among the most expensive commodities in the country.

However, local manufacturers have hinted that the prices could ease towards the end of July, amid a correction in the prices of crude and palm oil in the global market.

Crude palm prices have dropped from an average of $2,100 (247,842 shillings) per ton in June to $982.39 (115,941 shillings) in July. On 8^TH July 2022, a ton was quoted at $892.05 (105, 279 shillings).

Malaysia’s benchmark palm oil prices are also expected to ease at the end of this month, signaling cheaper products if importers and manufacturers move to pass the benefits to consumers.

The Kenya National Bureau of Statistics (KNBS) data indicated a liter of cooking oil had increased to 387.98 shillings in June, 51.7 percent compared to 225.83 shillings the same month in 2021.

A spot check by Soko Directory shows that some brands are currently selling at as much as 450 shillings per liter in the local retail shops and supermarkets.

Prices of detergent have also increased 19 percent according to KNBS, with a 500 grams product averaging 198.06 shillings up from 165.59 shillings.

The Retail Traders Association of Kenya (RETRAK), the retail sector lobby group, have also defended the rising commodity prices citing that buying price from the manufacturers has risen dramatically due to increased costs of manufacturing, while retailers’ margins have decreased due to their attempt to maintain prices.