Global Oil Prices Tumble To Near 11,030 Shillings Amidst Inflation Fears

By Lynnet Okumu / Published August 31, 2022 | 12:07 pm

KEY POINTS

Fuel prices for the period 15^th August 2022 to 14^th September 2022 stand at 159.1 shillings per liter for Super Petrol, 140.0 shillings per liter for Diesel, and 127.9 shillings per liter for Kerosene in Nairobi.

Industrial landscape. Oil Field. Oil pumps against the setting sun.

KEY TAKEAWAYS

The October Brent contract on the Intercontinental Exchange was at $104.52 (12,531.95 shillings) per barrel, down 0.54 percent from the previous close. West Texas Intermediate futures were at $96.93 (11,621.91 shillings), a barrel on Tuesday, August 30, 2020, hitting the lowest level since January mid-month.

Oil is headed for a third straight monthly drop, the longest losing run in more than two years. This is attributed to prospects for slower global growth as central banks jack up interest rates and China presses on with its Covid Zero strategy.

In the US, the Federal Reserve has been raising rates aggressively to quell inflation, while Europe is gripped by an energy crisis that may point to a recession. In Asia, growth in China, the top oil importer, has slowed.

While there has been significant unrest in both Libya and Iraq in recent days, oil output in both OPEC members appears to be unaffected so far. However, talks to revive an Iranian nuclear deal that may unlock greater crude exports have dragged on.

Oil’s decline in August marks the latest chapter in what’s been a tough year, with prices driven higher in the first half by Russia’s invasion of Ukraine, then undermined as central banks shifted tack and Moscow managed to keep most exports flowing.

Crude’s recent slump prompted OPEC+ heavyweight Saudi Arabia to raise the possibility the alliance could cut output, although Russian media reported the grouping wasn’t discussing such a move at present.

According to market analysts such as Ravindra Rao, crude oil may remain volatile amid mixed factors, but growth worries and shaky risk sentiment may result in some selling pressure at higher levels.

This fall has however eased the pressure on diesel, petrol, and kerosene prices in most African countries such as Kenya, where the retail prices of these commodities have remained unchanged for over two months now.

The drop would also come in a period when the International Monetary Fund (IMF) has asked Kenya to drop the fuel subsidy program by October 2022, exposing motorists to a sharp rise in pump prices.

In Kenya, the costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country. Producers of services such as electricity and manufactured goods factor in the higher cost of petroleum in their product pricing.

Most households rely on kerosene and LPG for lighting and cooking, making crude price a key determinant of the rate of inflation.

The economy also uses diesel for transportation, power generation, and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce.