Global oil price drop increases chances of petrol price cut in Pakistan

ISLAMABAD: As global oil prices continue to fall, there is increasing optimism that petrol prices in Pakistan may also decrease.

Reports indicate that there is a potential decrease on the horizon, with the government set to announce the new prices at midnight on June 15, 2024. These rates will remain effective until the end of June.

Today, global oil prices fell, reversing some of their weekly gains due to a broader financial market risk-off sentiment and indications of strong global supply. Brent crude traded near $82.41 per barrel, marking a 0.41 per cent decrease for the day but a 3.65 per cent increase for the week.

Similarly, West Texas Intermediate (WTI) crude was priced at $78.16 per barrel, down 0.59 per cent for the day.

Market dynamics, including regional stock declines, have exerted downward pressure on oil prices. Bloomberg reported that this decline was influenced by cooling US inflation and the Federal Reserve’s decision to limit interest-rate cuts this year.

Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore, noted, “Market participants are reassessing if they have got ahead of themselves as weaker-than-expected US economic conditions were presented overnight amid the recent ‘hawkish hold’ from the Fed.”

Since early April, oil prices have been on a downward trend due to demand concerns. Recent attacks on ships by Yemen-based Houthi militants have further threatened trade flows, adding to the market’s volatility. Increased US oil supply and a slowdown in Chinese refining activity are also contributing to the uncertain outlook.

Despite these challenges, timespreads remain in a bullish, backwardated structure, where later-dated contracts trade at a discount to nearer ones, suggesting tight supplies. The gap between Brent’s two nearest contracts stood at 40 cents a barrel in backwardation, up from 28 cents a week ago.

This week, the International Energy Agency highlighted a potential major surplus this decade as the transition away from fossil fuels gains momentum, a claim that was met with criticism from the Organization of the Petroleum Exporting Countries (OPEC).

While the projections of a petrol price reduction in Pakistan are encouraging, it is important to note that these are still speculative. The official announcement from the government will provide clarity on the new pricing structure.

Read next: Gold prices increase in Pakistan