Crude Oil and Refined Products Market Review and Outlook

Global demand for crude and petroleum products have continued to surge since January 2024 in tandem with the World Bank’s projections of about 3.1% global economic growth this year. According to the World Bank, the global economy in 2024 is expected to outpace growth in 2023 by about 0.4% due to greater-than-expected resilience in the United States and a strong fiscal stimulus in China.  Macro-economic indicators have shown that inflation and interest rates in US, China and Europe have declined significantly in January. According to the IMF, global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025. The improvement in the global economy largely accounts for the current surge in global demand and the consequent increase in crude and petroleum product prices.

According to CITAC, “OPEC+ crude oil production (excluding condensates) saw its biggest drop in six

months by 340 kb/d m/m in January to 34.4mn b/d, according to SPCGI data, driven by decreases from Libya, Kuwait, and Iraq”.  This cut in production is far less than the approximately 700 kb/d cuts pledged for Q1 2024.

Moreover, the Energy Information Administration (EIA) indicated that US crude oil production dropped significantly in January 2024 to 12.62mn b/d, falling under 13mn b/d for the first time in six months.

Crude oil surged by about 1.4% from USD81.3/bbl to USD82.43/bbl in the window under review. This represents a Y-o-Y decline of about 1.0% and a surge of about 5.1% since the first window of December 2023.

The demand for petroleum products has been projected to rise in the first quarter of the year, given the higher-than-expected growth in the US and China. Moreover, Reuters predicts that the US central bank will begin to cut down its interest rate, which will further raise demand for crude and petroleum products.

The international market price of all major petroleum products surged in the window under review. Petrol, diesel and LPG surged by 3.2%, 1.6%, and 2.9%, respectively. Compared to the same period last year, petrol and LPG prices declined by 1.0% and 14.7% respectively while diesel rose by 7.7%. On a y-t-d basis, the international market price of petrol, diesel and LPG surged by 11.5%, 11.4%, and 4.7% respectively.

FuFeX30 and Spot Rates

The Fufex30^[1] for the first selling window of March (1^st to 15^th March 2024) is estimated at GHS12.9500/USD, while the applicable spot rate for cash sales is GHS12.8000/USD based on quotations received from oil financing commercial banks.

[1] The Fufex30 is a 30-day GHS/USD forward fx rate used as a benchmark rate for BIDECs ex-ref price estimations.    

The BoG’s bi-weekly FX auction to BIDECs in the 16^th to 29^th February 2024 pricing window for the purchase of petroleum products was US$20 million, representing 23% of BIDECs’ bid. The FX rate auctioned by BoG to BIDECs was GHS12.4888/USD, representing a depreciation of 0.75% compared to the previous window. The BOG auction rate has depreciated by about 2.79% from the beginning of the year and about 7.26% from October 2023 to February 2024.

The Ex-Refinery Price Indicator (Xpi)

The Ex-ref price indicator (Xpi) is computed using the referenced international market prices usually adopted by BIDECs, factoring in the CBOD economic breakeven benchmark premium for a given window, and converting from USD/mt to GHS/ltr using the Fufex30 for sales on credit and the spot FX rate for sales on cash.

Ex-ref Price Effective 1^st to 15^th March 2024

Taxes, Levies, and Regulatory Margins

Total taxes, levies and regulatory margins within the 16^th to 29^th February 2024 selling window accounted for 23.8%, 21.5%, and 15.0% of the ex-pump prices of petrol, diesel and LPG, respectively.

OMC Pricing Performance: 16^th to 29^th February 2024

The average pump prices of petroleum products for the 16^th to 29^th February 2024 (the second selling window of February) surged by an average 1.7%, 6.0%, and 8.8% for petrol, diesel, and LPG respectively.  This decline coupled with the depreciation of the Cedi/USD exchange rate by about 0.8% has largely resulted in the surge in pump prices.

Pump prices of petrol within the period rose by 2.7% from GHS11.8320/Ltr to GHS12.4950/Ltr. This was mainly due to the depreciation of the cedi against the dollar within the period and the recent escalation in global petroleum products prices. On a y-o-y basis, petrol pump prices declined by about 12.4%.

Similar to the pump price of petrol, diesel prices surged by about 3.8% from an average of GHS12.8080/ltr to GHS13.6110/Ltr in the 16^th to 29^th February 2024. On a year-on-year basis, pump prices for diesel declined by about 6.7%. This rise is attributed to international market factors and the depreciation of the Cedi against the US dollar within the period.

Pump prices of petrol, diesel and LPG are expected to increase in the coming window due to the weakening of the Cedi against the US Dollar in February by about 6.4% and the surge in international market prices by about 11.5%, 11.4%, and 4.7% for petrol, diesel and LPG in 2024 respectively.