Kenyans miss out on largest oil price drop in three decades

A worker walks at the power plant of an oil processing facility at an oilfield in Unity State on April 22, 2012. Landlocked South Sudan produces 350,000 barrels a day of crude. [Reuters]  

Oil prices yesterday posted the biggest single day drop since the 1991 Gulf War following disagreement between Saudi Arabia and Russia, which are among the top oil producers.

A Reuters report said Brent crude prices were down by more than 27 per cent at $35.50 (Sh3,550) a barrel around midday, after early dropping by as much as 31 per cent to $31.02 (Sh3,102), their lowest since February 12, 2016.

The crash came after Saudi Arabia and Russia signalled they would hike output in a market already awash with crude after their three-year supply pact collapsed.

Prices have been on a free fall over the last few weeks due to depressed demand caused by the coronavirus outbreak, but Kenyans might not benefit from the drastic drop, at least not in the pump price review expected later this week.

Saudi Arabia together with other Opec (Oil Producing and Exporting Countries) members had planned to cut production to support prices.

Russia, which was expected to support the move, backed out of the plan. Saudi in turn increased production and cut prices, sending the markets into turmoil.

Despite the fall, Kenyans will wait longer for any benefits as the prices that will be published on March 14 will be based on cost of oil imported in February.

Slight decline

The Energy and Petroleum Regulatory Authority (Epra) said it would effect a slight decline this month following a corresponding drop in February when prices hovered between $50 (Sh5,000) and $59 (Sh5,900) a barrel.

This was lower than January when prices peaked at $68 (Sh6,800) per barrel.

“We expect a marginal drop this month because of the falling oil prices. We are yet to compute but expect a marginal drop,” said Epra Director General Pavel Oimeke. 

He added that should the disagreement continue to the end of March - with the result being sustained low prices of crude oil - then motorists will enjoy relief at the pump.

“If the current drop is sustained for the next 30 days or so there could be a somewhat significant drop. From our assessment, however, the current price at about $33 per barrel is not sustainable and is a reaction to market forces especially price wars among the oil producers,” he said.

“However, if it says that way for the next month or until the next price review, we expect some impact for consumers.”

Should Opec and Russia sort out their differences and agree on cutting production in the coming few days, it would mean that Kenyans will not benefit from the biggest crude oil price drop in four years.