Tuesday, February 20, 2018 2:04:26 PM- Nigerian Stock Exchange.



  High crude oil prices are bad news for petroleum products

      

Jan 18 (Lagos) -  Amidst recent higher oil prices, disruptions in getting refined products to the depots has exerted pressure on the price charged by the depots and this, in turn, is pressuring the pump price. 


Amidst strike threats by petroleum marketers and queues building up, analysts at Vetiva Capital Management Ltd in V.I see a greater risk of black markets for the product in the interim”. Unsurprisingly, PMS prices spiked during the month, surging to an average of N 171.79 per litre, the highest on record. 



Price pressure was most keenly felt in the South-East region of the country where prices averaged N 190.90 per litre. In addition, kerosene and diesel prices were also up m/m – 6% and 3% respectively as higher global crude oil prices squeezed importers. 



Analyst notes that the petroleum product price spike did not materially affect Core Inflation in December, with the only notable uptick coming in Transport Inflation which increased m/m from 0.78% to 0.91%. 



With oil prices still above $ 60/bbl (December average: $64/bbl, Ytd average: $69/bbl), landing cost of petroleum products remain high, discouraging importation and pressuring the retail price of these products. 



Whilst analyst expects continued pass-through to kerosene and diesel prices despite NNPC intervention, they expect a more muted price response for PMS. Specifically, they do not envisage that there will be a price revision or deregulation given the proximity of elections.



Rather, "we anticipate either a continuation of the current regime where NNPC imports and distributes to marketers or the introduction of an implicit foreign exchange subsidy. However, we note that the persistence of the status quo would likely mean intermittent product shortages during the year as long as oil prices remain strong and some pass-through to the realized retail price like we saw in December."



reporting for easykobo.com on Thursday, Jan 18 2018 from Lagos, Nigeria



Source - analysts at Vetiva Capital Management Ltd in Victoria Island.


Note - all views, opinions, targets and forecast expressed in above article are those of analysts at Vetiva Capital Management Ltd in V.I. & Easykobo does not endorse or oppose any views expressed in above article. 



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