Oil prices hit three-year high |09 June 2021

Motor gasoline price evolution September 2020 – June 2021

• Seychelles rates compounded by rising USD

Fuel prices in Seychelles are likely to continue its battle with the international situation as well as with the foreign exchange rates for the weeks and even months ahead.

The picture is not seemingly bright for motorists and other users with negative price reviews likely to become a regular feature.

This week, the Seychelles Petroleum Company (Seypec), adjusted its prices of motor gasoline and gasoil, bringing rates higher by R1.10 and R1.38 per litre, respectively. This is yet again a combined effect of the price hike on the world oil market and primarily the devaluation of the rupee to the USD.

On the international trading side, it was the first time since 2019 that the price of crude oil has hit the US $72 mark whereas here in Seychelles the USD$ gained more than 13% since the national petroleum company last purchased foreign exchange for its imports at the local banks.

OPEC+ holds firm on supply

The Organisation of the Petroleum Exporting Countries and allies (OPEC+) announced last week it would stick to agreed restraints on production and supply to the markets. At the same time, a weekly report showed the U.S. crude inventories dropped more than expected the previous week. OPEC+ seems to tighten its grip on the price economics without letting the trading to influence the market on the downside. The cartel is showing a relative discipline in this management of its supply and is reported to contemplate even harsher policies sooner than later.

“It is a fact that the OPEC+ countries are encouraged by the results of their production cuts strategy,” Sarah Romain, general manager commercial at Seypec told Seychelles NATION. “This is what precisely they were aiming at: keep production to its lowest levels and stifle the supply on the markets to obtain a surge in the selling price.”

Iran uncertainty

Last week, another element of uncertainty added to the oil prices rise. This was after the United States reported yet another round of talks in Vienna regarding the Iranian nuclear deal, and possibly further rounds. The immediate consequence is the expected delay on the time Iran’s oil would eventually legally return to the market. To add to the already intricate situation, Washington hinted that there were no signs of an imminent agreement for an Iran nuclear deal. This piece of news immediately sent waves on the trading floors causing many doubts that the supply line will soon get another boost. This simply means that the prices will continue its upward trend until the nuclear deal is restored.

Covid vaccination hopes boost prices

A rising demand has been noted in the US and other main importing countries following the fast pace of vaccination in countries such as the United States and Europe. A faster vaccination rollout is starting to activate the oil market despite high infections in countries like Brazil and India.

“Almost every country in the world is on a recovery mode,” Mrs Romain commented. “Oil prices are on an upbeat sentiment as hopes for a demand recovery are lifted after a successful vaccination campaign in developed countries. This means that the international oil market is betting on the economic recovery in a ‘new normal’ scenario. The relaunch of the economic activities in Europe and in the US would entail a growing need for energy and therefore adding pressure on demand. It is expected that with the recovery, the oil imports will gradually shoot up all over the world to attain its pre-pandemic levels.”

Seychelles suffers double impact

Seypec revised its weekly price charts for motor gasoline and gas oil on Monday to R20.67 and 19.73. This is caused by the increasing world oil prices but also by the rate of the rupee to the USD. The US$ reached R16.95 compared to R14.72, the rate Seypec paid for the last consignments of its imports. Since the beginning of the year to-date, the global motor gasoline price has gone up by 47%, gasoil by 35% and fuel oil by 30%. Over the past two months the increase has been 9% on motor gasoline, 19% on gasoil and 10% on fuel oil.

“It is always the same explanation to any price fluctuation in Seychelles,” Mrs Romain said. “Seypec has to align itself on prices of the world market together with the rate of exchange. The rupee-USD factor is one of the two main components of our main factors for determination of our prices every week. Therefore, we make it a point to adjust the prices on a weekly basis to pass on any change to our customers, be it lower or higher.”

As June unfolds, the mixed bag for fuel prices will continue with the eye on a double-fold screen: world oil prices and US$ rate. Analysts have already warned world economic players that a return to a stable situation will push oil prices even higher. The 100 US$ mark is no longer a distant forecast but rather a realistic preview of what the situation will be by the end of the year. In Seychelles, it can only be hoped that the improvement of the rate of exchange would act as a buffer to increasing world oil prices.