Fuel prices rise in heavily stressed market
© Tim Scrivener Fuel markets are extremely volatile as a result of the uncertain economic outlook.
Red diesel quotes gathered by Farmers Weekly on Wednesday 12 October from a variety of suppliers ranged from 110.25p/litre to 117.06p/litre, based on a 5,000-litre drop for delivery early next week.
On average, this is a 7p/litre rise on the week and the highest average (113.06p/litre) since 13 July.
This compares with 74.64p/litre a year ago. With an open autumn, demand has been high in a market background where 20% of UK diesel and about 30% of EU diesel is imported from Russia.
Haulage remains an issue, which is likely to intensify as Christmas demand places more pressure on this resource, warned suppliers.
Some are still pricing on the day of delivery, while most have reverted to pricing when the order is placed.
See also: Why farmers should have a health and safety emergency plan
At farm input pricing platform Yagro, market place manager Neil Cooper said red diesel prices midweek ranged from 108.82p/litre for an 18,000-litre drop, to 114.2p/litre for 5,000 litres, with huge swings daily.
There were no noteworthy deals to forward-fix prices, he said. Â
“The market outlook is volatile and set to remain so. It is not helped by the current French refinery strike in an already stressed European market,” said Mr Cooper.
“The Opec cut is going to be an interesting one to watch, with comments coming out of Iraq that its economy cannot afford to cut production and that could potentially break Opec’s agreement.Â
“The impact of the war in Ukraine will continue to affect the market for potentially years to come. Kwasi Kwarteng and his mini Budget are playing havoc with exchange rates, adding yet more volatility.
“The only relief comes at the detriment of the Chinese population, with their fresh Covid lockdowns relieving oil requirements and, therefore, any pricing pressure from Asia.”
Planning ahead, knowing your fuel requirements for key points in the year and then watching the market to fill or top up tanks in advance of those key times is a straightforward strategy to navigate the current volatility, said Mr Cooper.
“Forward-fixes will continue to suit farms with regular fuel use and sufficient tank space to allow for peak and trough use.
“If you can buy a larger tank, having the option to buy in larger loads at hopefully weak points in the market will pay for itself in a couple of years.”
Fuel stocks
Brexit released the UK from the obligation for EU member states to hold the equivalent of 61 days of strategic reserve fuel stocks.Â
The UK stocks are the equivalent of 35m barrels of oil, equating to about 25 days’ supply. However, these are held by corporations rather than the government.
Fuel market influencesÂ
Opinion on the prospects for economic growth and the path of oil prices is divided, with many factors at play:
- Central banks are using interest rate rises to slow inflation
- Opec+ (23 of the main oil producers, 10 of which are exporters) plans to cut production
- High pump prices in the US have led to the prospect of its oil and fuel exports being limited
- EU sanctions on Russian oil are due to be ramped up in early December
- Recent Russian attacks in Ukraine targeted power and heating infrastructure
- French refinery pay strikes have taken out about 60% of the country’s capacity and left an estimated one in three forecourts dry
- Global refining capacity has shrunk in recent years and the appetite for new investment is poor
- Some analysts think China’s efforts to boost its sluggish growth rate will increase oil demand and prices, but Covid-19 lockdowns continue to dampen the outlook.