Petrol to follow wholesale prices higher

Weekly petrol prices

Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by just 0.1 cents per litre to 111.7 cents per litre in the week to August 28.

In Australian dollar terms the Singapore gasoline price has risen by almost 25 per cent in the past month – the biggest lift in five months.

MotorMouth records the following retail prices for capital cities today: Sydney 115.7c; Melbourne 100.4c; Brisbane 102.8c; Adelaide 109.3c; Perth 103.7c; Canberra 118.6c; Darwin 114.8c; Hobart 121.1c.

New home sales ease: New home sales declined by 9.7 per cent in July after rising by 8.2 per cent in June. The decline in total sales was reflected by a decline in detached house sales (-7.4 per cent) while sales of ‘multi-units’ fell by 17.3 per cent.

What does it all mean?

The latest weakness in new home sales resonates with the softening in housing activity across the nation – in particular the data on home loans, which has been decidedly more mixed in the past few months. It is clear that housing activity is consolidating with potential home buyers being more circumspect on purchases and lenders tightening lending criteria. The softening in home building should lead to a much more sustainable housing market.

Interestingly the data is for July and wouldn’t factor in the decision by the Reserve Bank to cut the cash rate in August. It is likely that the rate cut and the speculation of low interest rates over the medium term will support demand for property.

Importantly the pipeline of new home building remains solid and should support an array of sectors and broadbased activity. The latest data doesn’t have a great influence on the next interest rate decision. The Reserve Bank is determining whether lower-inflation Australia can justify having an interest rate structure closer to those in other major advanced economies.

Petrol prices barely lifted last week. Unfortunately for motorists it is very likely that price gains will be more substantial in coming weeks. The trend has clearly changed in the past few weeks with a shift in global sentiment likely to impact domestic pump prices.

In particular the focus of oil markets now shifts to an informal meeting of oil producing nations set for September 26-28 in Algeria. And global oil prices have well and truly reacted ahead of that meeting. In fact in the past four weeks the Singapore unleaded price has surged by almost 25 per cent in Australian dollar terms. Leading up to that meeting it is likely that oil prices will remain volatile on speculation that oil producers may look at avenues to limit output and thus support prices.

What do the figures show?

Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by just 0.1 cents per litre to 111.7 cents per litre in the week to August 28. The metropolitan petrol price rose by 0.4 cents to 110.2 cents per litre while the regional price fell by 0.4 cents to 114.9 cents per litre.

The national average Australian price of diesel petrol fell by 0.1 cents to 117.6 cents per litre in the week to August 28. The metropolitan price fell by 0.2 cents to 116.5 c/l, while the regional average price fell by 0.2 cent to 118.4 c/l.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up 7.9 cents to 120.6 c/l), Melbourne (down 3.6 cents to 101.0 c/l), Brisbane (down 2.7 cents to 103.2 c/l), Adelaide (down 4.2 cents to 115.0 c/l), Perth (up 2 cents to 113.0 c/l), Darwin (down 0.4 cents to 114.9 c/l), Canberra (unchanged at 118.8 c/l) and Hobart (down 0.1 cents to 120.7 c/l).

Today the national average wholesale (terminal gate) unleaded petrol price stands at 106.1 cents a litre, up 2.8 cents a litre over the week. The terminal gate diesel price stands at 105.8 cents a litre, up 2.3 cents a litre.

Last week the key Singapore gasoline price rose by US$1.00 or 1.7 per cent to US$59.00 a barrel. And in Australian dollar terms the Singapore gasoline price rose by $1.40 a barrel or 1.8 per cent to $77.23 a barrel or 48.57 cents a litre.

MotorMouth records the following retail prices for capital cities today: Sydney 115.7c; Melbourne 100.4c; Brisbane 102.8c; Adelaide 109.3c; Perth 103.7c; Canberra 118.6c; Darwin 114.8c; Hobart 121.1c.

New home sales

Total seasonally-adjusted new home sales declined by 9.7 per cent in July after rising by 8.2 per cent in June. The decline in total sales was reflected by a decline in detached house sales (-7.4 per cent) while sales of ‘multiunits’ fell by 17.3 per cent.

The Housing Industry Association reported: “In the month of July 2016 detached house sales fell in all five mainland states, after rising everywhere in June. Sales dropped by 12.6 per cent in South Australia and were down by 8.7 per cent in Queensland, 8.2 per cent in Western Australia, 6.2 per cent in NSW, and 6.0 per cent in Victoria.”

What is the importance of the economic data?

Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 home builders. The survey covers around 14 per cent of the home building industry. What are the implications for interest rates and investors?

From a fundamental standpoint the world is still well supplied with oil. Not only has there been a lift in US crude oil inventories in the past couple of weeks but an increase in operational US oil rigs has also added concerns about a rise in future supply. In short it is likely to be a very fluid situation over the next couple of months.

Extracted in full from The Bull.

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