Pump prices have been on a sustained drop since December last year due to the global fall in crude prices.
In an increasingly bullish oil market, both WTI (West Texas Intermediate) and Brent look set to continue climbing.
Prices of Murban crude on the global market have climbed to highs last seen in October last year, setting up Kenyans for a rise in the cost of fuel after a short season of decline that started in December.
A barrel of Murban crude was selling at a five-month high of $90.61 (Sh11,531.50) by Tuesday this week, the highest level since $91.57 (Sh11,650.93) per barrel posted in October last year. Brent crude rose to $90.57 (Sh11,520.64) from $90.45 (Sh11,505.38) in the same period. The Energy and Petroleum Regulatory Authority (Epra) uses Murban prices as the benchmark in its monthly pricing cycle.
The rally, attributed to fading hopes of a ceasefire between Israel and Hamas and tightening supply on Mexico’s decision to cut crude exports, sets up Kenyans for expensive fuel in the coming months.
Pump prices have been on a sustained drop since December last year due to the global fall in crude prices. A litre of Super petrol is going for Sh199.15 in Nairobi while that of diesel is retailing at Sh190.38.
“In an increasingly bullish oil market, both WTI (West Texas Intermediate) and Brent look set to continue climbing on the back of a strong demand outlook and new supply issues,” Oil Price, a global site that tracks prices of the commodity, says.
The landed costs of the refined fuel that Kenya imports largely mirror the trends in global prices of crude oil, meaning that Kenyans should brace for tough times in the coming months.
The global rally may negate the gains that Kenyans have enjoyed at the pump due to the strengthening of the shilling against the dollar.
The recovery of the shilling against the dollar notably since February further added to the gains of the global drop in crude oil prices, significantly easing pressure on Kenyans.
A litre of Super petrol has dropped by Sh18.21 in Nairobi between December and last month while that of diesel has declined by Sh13.09 and Sh14.32 for that of kerosene.
The drops have been critical to easing inflation — the measure of the cost of living — to 5.7 percent last month from 6.3 percent in February.
Kenya imports refined fuel, meaning that the price of fuel is largely outside the government’s control, unlike other countries that refine crude.
Prices of Murban and Brent crude have sharply risen since the start of the month after Israeli Prime Minister Benjamin Netanyahu said a date had been set for Israel’s invasion of the Rafah enclave in Gaza, ending hopes of a ceasefire.
Escalation of the conflict fuels fears of pulling in other countries, especially Iran which is a major Hamas backer and the third-largest oil producer.
Government-owned oil firm, Pemex of Mexico, will reduce crude exports by 330,000 barrels per day to supply more to domestic refineries, cutting supply to US, European and Asian buyers by one-third and further tightening supply.
On Wednesday, oil prices rose again as a deadlock in Gaza ceasefire talks renewed uncertainty about the security of supply from the Middle East and offset a bigger-than-expected build in US crude inventories, Reuters reported.
Brent crude futures rose 70 cents, or 0.8 percent, at $90.12 per barrel at 1320 GMT, while US West Texas Intermediate (WTI) crude futures rose 69 cents, or 0.8 percent, to $85.92, according to Reuters.
Analysts attribute the rising prices of oil to the heat coming out of the rally in crude early in the week when there was some hope of a ceasefire in Gaza and higher US inventories.
