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Sunday 17.12.2017 | Name days: Teiksma, Hilda
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Fuel prices reach lowest level in the past four years

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUFollowing the decline of prices on oil products in the world, fuel prices at Neste Oil petrol stations in Latvia reduced once again this Tuesday, October 28th. With that, fuel prices have reached the lowest level in the past four years.

From this year’s highest price level for diesel fuel in March and petrol in June, prices for Neste Futura 95 and Neste Futura 98 brand petrol have declined by EUR 0.14 per litre. The price of Neste Futura diesel fuel has reduced by EUR 0.12 per litre, as reported by the company.

As noted by SEB Bank macroeconomics expert Dainis Gašpuitis, the short-term price changes will depend on decision of OPEC. Long-term prices will depend on the ability of beneficiaries not associated with OPEC can handle the growth of demand. With a price of $100 per Barrel, countries outside of the cartel are more capable of dealing with demand growth until 2017, which means OPEC has to reduce volumes. This is unlikely to happen. In order to keep its market share and press competition with USA, the price has to reduce and consumption needs to rise.

Saudi Arabia had notably reduced collection this August. However, politicians have noticed that this was likely done in order to maintain volumes and market share for exports to Asia. Price competition between members of OPEC and West African exporters creates conditions for low prices. Prices may be maintained by more active seasonal consumption this year.

Activity is on a rise on the oil market. This is largely because of the natural increase in this time of year. Brent oil price remains at $90 per Barrel. Latest oil price projections have been corrected downward, because Saudi Arabia has not expressed will to maintain $100 level. The challenge is on the side of OPEC, which needs to reduce collection by 1.5 million Barrel in order to balance the market. A lower price could potentially impact or increase demand for American shale oil. Demand is expected to be sufficiently high in Q4 2014. However, the first half of 2015 may turn out completely different. OPEC should be prepared to reduce collection. China may have to increase reserves in order to reduce surplus of supply, explains the economist.

«There will be a meeting of OPEC on November 27th. Potential scenarios may be proposed during this meeting. However, there is little hope for any agreements in regard to supply reductions. Changes in American oil stocks may have a neutral impact on prices, because it is expected that that stocks of crude oil will increase and those of its products will decrease. An alternative offer from OPEC will likely be able to compensate the growth of demand, which means lower prices. The expected price for next year is $85,» – said the expert.

«Price weakening is also impacted by global demand and other factors. Information regarding China’s economy shows that demand is not likely to recover soon. The argument that weak demand is a result of the expensive nature of oil as source of energy should also be kept in mind. Oil is six times more expensive than coal. It is also two times more expensive than gas in Europe. Those who can, switch to alternatives. Technologies develop rapidly and provide more and more opportunities for collection of alternative energy,» – says Gašpuitis.

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