The Ministry of Labour, Commerce & Industries has approved the new petroleum prices for January- February 2011 which are to be effective from Monday 17th January 2011
Oil prices for January-February 2011 are mainly determined by the movement of FOB prices in the Singapore market based on December 2010 average prices of the daily published Means of Platts Singapore (MOPS) benchmark prices. In accordance with these FOB prices, domestic oil prices in Tonga are adjusted every mid-month based on the previous month’s market price data so as to minimize any possibility of price lags. For the month of January – February 2011, the Ministry records a significant increase in the petroleum price as compared to the price approved by the Competent Authority for December 2010-January 2011.
Retail prices for all products for January-February 2011 has significantly increased compared to December 2010-January 2011 prices. The retail price for January-February 2011 for Petrol leads the increase by 15.56 seniti/litre (6.2%), followed by Diesel by 11.40 seniti/litre (4.5%) and kerosene have increased by 10.71seniti/litre (5.5%).
The significant increase in January-February prices above is attributed to the following reasons:
Crude prices continued to increase breaking decisively above US$90/bbl during December. Product prices in the Singapore market are all now above US$100/bbl and averaged at or above this level during December.
The fundamental increase in the petroleum price is demand driving the market. Increase petroleum demand especially from developed countries fell in 2008/2009 but has now stabilized and begun to recover during 2010. Demand for petroleum usage in China for November 2010 was recorded to be nearly 1.9mb/d above 2009 levels. The cold weather in much of the northern hemisphere has also boosted demand particularly for heating fuel (similar to diesel) and kerosene. As with the last few months, product prices have increased even more than crude prices which is an indication that the rally is demand led (crude prices rising in response to higher demand for products)
On the supply side, OPEC continues to restrain supplies and again slow to increase petroleum supply. Increase in demand compare to restricted supply has pushed petroleum prices further up.
Freight rate and exchange rate remains steady. Therefore the full effect of the increase in the commodity price (Singapore MOPS prices) was seen in the increase in Tonga’s wholesale price (compare to the change last month where the Tonga Pa’anga had strengthened against the US dollar so the wholesale price increase was not as much as would have been expected from the rise in the underlying commodity price.
Issued by the MLCI, Monday 17th January 2011