Motorists can expect some relief at the pump as oil prices have sharply declined, signaling a return to normal after a year of rapid increases.
Brent Crude oil prices have dropped over 7% since Monday, approaching $72 per barrel, which is the lowest level this year. This decline is attributed to concerns about weakening global growth in China and the US, which are affecting demand for oil.
The price drop intensified on Tuesday when political factions in Libya seemed close to a deal that could add more than 500,000 barrels of oil per day to the market. Meanwhile, the global oil cartel OPEC+ is considering reducing its control over oil supplies.
On Wednesday, the falling oil prices impacted the ASX energy sector significantly. Woodside saw a 2.5% drop, and Santos reached a six-month low. Despite this, Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association, believes that lower petrol prices might be on the horizon. He suggests that the recent drop in oil prices, combined with a stronger Australian dollar and improved refining margins, could lead to sustained lower wholesale petrol prices.
McKenzie pointed out that the wholesale petrol price in Australia recently hit a six-month low, easing cost-of-living pressures that had been heightened by high oil prices last year. He noted that oil prices are reverting to more typical long-term trends, with less market speculation and signs of stability in regions like Ukraine and the Middle East contributing to the price drop.
Additionally, RBC Capital Markets’ commodity strategist Brian Leisen has lowered his oil price forecast. He now expects Brent Crude to average around $75.75 per barrel in the final quarter of 2024, and to decline further to about $72.50 per barrel in 2025. Leisen attributes this forecast to expected oversupply, a weakening economic environment, and soft demand in Asia, which could keep oil prices lower in the coming years.