Namibia: India Covid-19 Cases Surge Stabilises Oil Prices

AFTER nearly five months of steady increases in international oil prices, the prices have suddenly stabilised, due to the surge in Covid-19 cases in India.

The Ministry of Mines and Energy revealed last week in their monthly fuel review announcement that the ministry will not increase the fuel pump price for May but keep it as it is.

As a result, motorists, importers and industries who are the direct consumers of fuel will get a break for this month with the ministry not increasing the fuel pump price.

Consequently, nothing will be passed on to all finished goods and services prices (from fuel as an input) in the economy, impacting the cost of basics goods in the economy.

For 95 Octane Unleaded Petrol it will remain at N$13,15 per litre and Diesel 50 PPM will still cost N$13,18 per litre for the month of May.

This follow three months of consecutive fuel price increases from N$11,38 for diesel and N$11,35 for petrol in January to N$13,18 (diesel) and N$13,15 (petrol) today.

The increases were 50 cents in February; 80 cents in March and 50 cents in April.

However, as highlighted by the ministry, the sudden break in the rise in oil prices was not because of increased production by oil producers around the world.

It is rather an unfortunate benefit from the reduced production in the Indian economy because of new restrictions due to the surge in coronavirus cases in the country.

The international market has been hit with fear of a slowdown in oil demand after India, the world's third largest oil importer after China and the United States, imposed restrictions as coronavirus infections and deaths surged to a record," said the ministry.

Additionally, Japan, the fourth largest oil importer, is also expected to announce Covid-19-induced restrictions.

These developments have impacted the world oil demand and supply dynamics and the markets have reacted accordingly.

Beyond India's demise, the local currency also gained momentum against the USA dollar during April, at N$14,4272 compared to the March average exchange of N$14,9207.

This means the USA dollar was cheaper in April compared to March, which enabled the country to acquire more imports slightly cheaper.

As a result, "it also contributed to the final price stabilisation which has manifested during the month of April," said the ministry.

During April, the barrel price of petrol across the internal products market have also decreased slightly from US$73,64 to US$73,63, while that of diesel decreased from US$68,55 to US$66,89 during the current review.

As a result, the current under-recovery stood at 38 cents on petrol and overrecovery of 18 cents on diesel.

These values are relatively low and therefore the ministry has resolved to keep the fuel price for the month of May the same.

However, since Namibia is a price taker in the fuel market, the ministry reminded the economic agents that the oil market is quite volatile, and that the prices can take any direction any time.

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