“Excellent news for drivers: both diesel and unleaded petrol prices will be lower in the coming days. In comparison to retail values from the beginning of February, a change in the consumer’s favour may amount to as much as 0.20 PLN per liter,” writes Marcin Lipka, Conotoxia senior analyst.
What is the reason for the drop? On the European wholesale market, fuel is decreasing to the lowest levels seen in almost 6 months. This should translate into clear reductions in retail prices. In addition, crude oil may be under the pressure of escaping speculative capital as well as the growing oil production in the United States.
The Americans are saving us again
In the short term, sentiment and speculations rule the "black gold" market. In the medium to long term, the first play is accomplished by foundations. Fortunately, the second factor begins to work in favour of raw material importers. This is primarily related to the strong growth in oil production in the United States and a clear supply increase in the coming quarters.
At the beginning of February, daily oil production in the US exceeded 10.2 million barrels and was the highest in recorded history. The United States will soon become the largest oil producer in the world, thanks to the revolution of shale. Now, Russia and Saudi Arabia extract less than 11 million barrels per day and according to American Energy Agency (EIA) estimates, the US will exceed 11 million in the fourth quarter of this year.
In February’s report, the EIA raised expected oil production in the US for the current year by as much as 300,000 barrels daily. Also, recent studies by OPEC and IEA (International Energy Agency) assume that the acceleration of extraction in the United States and growing demand should limit the chances of price increases and promote stabilization.
Fear among speculators
Luckily for drivers and foundations alike, the speculative play on oil may also work. According to Bloomberg estimates, investors’ positions at the beginning of February aimed at an increase in crude oil at a level over one billion barrels. This is historic.
However, when oil began to fall sharply in recent days (around 10%) instead of continue the upward trend, a high probability that speculators will begin to reduce oil-price bets which may deepen declines arises. Speculators getting their fingers burnt should also limit the game to one side and reduce the price pumping likelihood, at least temporarily.
How much will we pay for diesel and petrol?
On the ARA market (Amsterdam-Rotterdam-Antwerp), which determines wholesale fuel prices in Europe, the cost of unleaded 95 petrol fell by 16 grams and reached the value of 1.58 PLN/liter in just over a week. These levels have not been seen since August of last year. Diesel, in turn, decreased by 0.17 PLN in the same period and has also been quoting 1.58 PLN/liter.
Analyzing the relationships between the wholesale and retail markets, we can expect a decrease in diesel and unleaded petrol prices by about 0.20 PLN compared to the average levels from the beginning of the month. Diesel may therefore fall to about 4.40 PLN/liter for retail, and for 95, we will pay about 4.50 PLN/liter. If this possibility exists, it is worth it to wait a few days to refuel until stations take the lower prices from the wholesale market into account.