Australian fuel market update - 13 August 2023

The rapid rises in global oil and Diesel prices slowed this week, both registering less than a 1% increase. This is the smallest weekly increase since before July. No such reprieve for Gasoline, with international wholesale prices up 6%, nor Jet Fuel with prices up 3%.

We expect to see domestic wholesale Diesel price rises moderating in the short-term as a result. However, with a declining Australian dollar, higher shipping costs, and increases in hedging costs, we will not see the full benefit of these slowing international price rises locally.?Given how quickly wholesale prices have moved in the past few weeks, we see there is also some catching up to do in the retail Diesel market, and so on current trends we may see bowser prices climb further this week before moderating.?

While a lot of noise has been made in recent weeks about oil price increases, having risen US$11 per barrel between Friday 2 July and Friday 13 August, the international Diesel wholesale price has increased by US$28 per barrel in the same period. The difference between the two is largely due to the growth in refining margins, which has contributed most to today’s higher prices at the?bowser.

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Australian fuel market:

• The international wholesale price for Diesel out of Singapore is now at US$121 per barrel, up 0.5% vs. last week. Jet Fuel is up 3% and Gasoline is up 6%;
• The Australian dollar weakened this week by 1%, ending at US$0.6522;
• Shipping costs into Australia increased 4% to approximately 2.6x ‘standard rates’.

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International industry news:

• Oil prices ended the week up 0.7% at US$87 per barrel;
• The International Energy Agency (IEA) revealed it expects average oil demand through 2023 to be 102.2 million barrels per day, 2.2% up on last year and primarily driven by China’s recovery. Oil demand hit a record of 103 million barrels per day in June;
• The US grew its oil inventories by 5.8 million barrels in the week to 4 August, contributing to the slowing in oil price rises this week;
• Refining profit margins in Europe and the US are up by c.33% year to date, and in Asia by c.9%, according to Refinitiv data;
• 430,000 barrels per day of refining capacity is planned to be offline next month in India, which will support high refining margins in the near-term.

As always, please contact your IOR account manager should you have any questions about the implications for your business. If you're not a customer yet, contact us at 1300 457 467 or [email protected] to find out what we can do to support your business.

IOR customers can access account details, transaction history and more, by logging onto the IOR portal at?customer.ior.com.au.