Namibians may be able to breathe a sigh of relief as a new report by Simonis Storm predicts fuel cuts in the coming months, despite earlier forecasts of rising oil prices.
The research firm had previously predicted that a number of factors, including China’s economy opening up, an increase in air travel, and a cut in oil production by the Organization of the Petroleum Exporting Countries (OPEC), would cause oil prices to continue to rise.
However, the report now suggests that oil prices may remain relatively flat, with Brent crude prices only rising based on news of economic activity improving in Western economies.
Simonis Storm Economist Theo Klein explains that the mixed view on oil demand is a contributing factor to the relatively stagnant oil prices.
“ This mixed view on oil demand (i.e. rising demand in emerging markets but decreasing demand in OPEC) partly explains why oil has been relatively flat between the USD 75 to USD 85 range since the start of the year. These forces could imply that Brent crude prices remain sluggish between the USD 75 to USD 80 per barrel range in coming months and will only rise based on news that economic activity is improving in Western economies. We have seen that OPEC+ production cut announcements do not lead to lasting higher Brent crude prices.”
Klein notes that Namibia has yet to feel the impact of the decrease in local fuel prices due to the Rand maintaining its exchange rate above 18 to the US Dollar. However, with revised Rand/US dollar forecasts for the remaining quarters of 2023, the Rand Brent crude price is expected to decrease.
The report warns that the new outlook is dependent on global Brent remaining flat to slightly negative and for the Rand to appreciate.
Nevertheless, this comes as the Ministry of Mines and Energy announced a decrease in the price of diesel by 80 cents for May, while the petrol price remained unchanged.
Namibia, which consumes 90 million litres of fuel per month on average, is likely to benefit from the predicted local fuel cut.
