Global crude prices bounced last week and Australian petrol prices could be next

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Australian petrol prices are falling fast, recording the largest drop in eight months last week. However, motorists shouldn’t get too excited, says Commsec’s chief economist Craig James. That trend is unlikely to last.

“In four of the last five weeks, petrol prices have retreated,” said James.

“According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 3.4 cents to 126.7 cents a litre in the past week.

“The metropolitan petrol price fell by 4.4 cents to 125.2 cents per litre while the regional price fell by 1.4 cents to 129.7 cents per litre.”

Source: Commsec

While retail prices are sliding, mirroring a previous decline in crude prices that was sparked by concern that production cuts announced by OPEC and non-OPEC producers in late 2016 will not succeed in rebalancing crude markets in a timely manner, James says renewed strength in crude prices over the past week means that petrol prices may now start to reverse.

“Last week the key Singapore gasoline price rose by $US3.30, or 5.2%, to US$66.30 a barrel,” he says. “In Australian dollar terms, the Singapore gasoline price rose by $4.04 a barrel, or 4.9%, to $86.73 a barrel.

The average wholesale price for Australian retailers also edged higher last week, rising one cent to 112.5 cents per litre.

Given the lagged effect that retail prices have to crude and wholesale prices, James says there’s unlikely to be much more flowing through in terms falls.

“Petrol prices may fall another 2-3 cents a litre in the next fortnight but this may be as good as it gets for motorists,” he says.

Given school holidays start in many Australian states and territories shortly, perhaps now’s a good time to fill up.

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