"The harsh winter in North America combined with the disrupted supply of crude oil is causing the price of basic energy sources to increase. Fuel is becoming more expensive in global markets, as well. However, Polish drivers can feel grateful as these increases are being reduced by the weakest dollar in three years," writes Marcin Lipka, Conotoxia senior analyst.
At the end of 2017, European Brent oil exceeded 66 USD per barrel, and its American counterpart (WTI) amounted to above 60 USD which are the highest levels since mid-2015. Fuel prices also are going up on the world's market, mostly diesel. Diesel oil (ON) on the US wholesale market has increased by 7% since the beginning of December, which will probably also translate into the diesel prices in Poland.
Harsh winter and production disturbances
One month ago, OPEC and Russia extended their agreement on production cuts. Since then, there have been constant signals that support raw material quotations. Less than three weeks ago, the Forties oil pipeline system was closed due to a breakdown. This resulted in a reduction of oil transmission from the North Sea to around 450k barrels per day (0.45% of the world's production).
Information from a few days ago about the oil explosion in Libya had a negative impact on "black gold" supplies. This transported around 70-100k barrels of oil per day.
Apart from the exceptional events, it is worth noting that according to Thursday's EIA (Energy Information Administration) report, shale production fell last week and oil stocks and production fell by 8.8 million barrels. This information pushed WTI quotations above the 60 USD limit on Friday night.
It’s not only supply restrictions that are important for the market. There is also a relatively strong demand for main consumers. In the US, diesel oil stocks are 14% lower than they were a year ago, and increases in fuel prices are influenced by harsh winter in North America.
Some households in the US (about 6 million, mainly in the North East - according to EIA) use oil for heating. Therefore, the colder it gets, the greater the demand. During the last few days in New England, citizens have already experienced a hard winter with the predictions of a temperature drop even up to negative 30 degrees Celsius next week. This also causes a strong increase in diesel prices in the wholesale market - about 7% since the beginning of December.
Weak dollar saves us from higher increases
High oil and fuel prices are also noticeable in Europe. However, Europeans are saved by a rather weak dollar. In addition, short-term fuel price changes are characterized to be more local than global. Diesel on the European market has increased less than it has in the US as no cold winter has been experienced in Europe this year.
As a result, a litre of diesel oil on the ARA market (Amsterdam - Rotterdam - Antwerp) is about 0.06 PLN (3%) above pre-Holiday prices and amounts to 1.80 PLN per litre. A year ago, with a similar level of diesel prices on the ARA market, the average diesel price at petrol stations, according to weekly reports of the European Commission, was 4.69 PLN per litre (the dollar cost 4.20 PLN at that time, and now it is around 3.50 PLN.) This means that price increases of this type of fuel in domestic petrol stations should not exceed 0.07-0.10 PLN in the first few days of January.
Fuel shouldn’t increase... even months down the road
Those who refuel unleaded petrol should be calm about fuel prices. On the ARA market, its price expressed in PLN has remained practically unchanged for the last two weeks at petrol stations for distributors.
The perspective of the next months on the oil and fuel market is not bad for drivers. According to the leading energy raw materials monitoring organizations (EIA, IEA), crude oil supply (mainly due to expected increases in the production in the US, Canada, Brazil and Kazakhstan) should follow and answer the increasing global demand. Apart from short-term disturbances due to extraordinary events, the average annual price of diesel or unleaded petrol should not exceed what has currently been observed, and may even be slightly lower.