Motorists can expect local fuel price cuts to be announced in coming months, however this is based on several factors.
Simonis Storm Securities said it seems that its initial forecast of reaching N$25 per litre for petrol and diesel by end of 2023 are too pessimistic at this point in time. However, the improved outlook remains conditional on global brent remaining flat to slightly negative and for the rand to appreciate, the firm said.
Ministry of Mines and Energy has disclosed an over-recovery of N$1.11 per litre on diesel and an under-recovery of N$0.95 per litre on petrol. As customary, the National Energy Fund (NEF) was utilized to partially subsidize the under-recovery of petrol prices.
According to figures by Simonis, in April, consumers paid N$19.78 instead of the actual price of N$20.73 per litre for petrol. Conversely, for diesel, consumers paid N$20.65 per litre, while the actual price was N$19.64 per litre. Notably, ministry has stated that there will be no adjustments to the current petrol price, but diesel prices will decrease by 80 cents/litre to N$19.85/litre from the month of May.
According to OPEC’s April monthly report, world oil demand for 2023 will remain unchanged at 2.3 million barrels per day (bpd). While there have been minor downward adjustments in the OECD regions, particularly in the OECD Americas and OECD Europe, stronger than expected demand in non-OECD regions during January and February has led to some upward revisions of expected oil demand.
Simonis said the latest projections indicate that oil demand in OECD regions will increase by only 0.1 million bpd in 2023, while non-OECD regions are expected to drive the majority of the growth, with an estimated increase of 2.2 million bpd. Together, oil demand will increase by 2.3 million bpd for 2023.
“This underscores the continued shift towards emerging markets as major drivers of oil demand. This mixed view on oil demand 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.”
According to OPEC’s April monthly report, non-OPEC supply will remain steady in 2023 at 1.4 million bpd. This steady growth rate is expected to be driven by the US, Brazil, Norway, Canada, Kazakhstan, and Guyana. In 2022, the main drivers of growth in oil supply were US, Russia, Canada, Guyana, China, and Brazil. In 2023, the US is still expected to lead growth in oil production, with an estimated increase of 400 thousand bpd. Brazil, Norway, Canada, Kazakhstan, and Guyana are also expected to play significant roles in driving the growth rate of non-OPEC oil supply.
Simonis said although oil prices are on a decreasing trend, the weakening rand exchange rate maintaining its level above 18 against the US dollar does not allow Namibia to experience a reduction in local fuel prices.
