Why pump prices may start rising again from August

Dar es Salaam. Tanzanian motorists may have to spend more on fuel from next August as petroleum producing countries extended production cuts in efforts to increase prices.
Oil prices plummeted as a result of falling demand as countries around the world imposed lockdowns to varying degrees in efforts to curb further spread of the new coronavirus.
Prices in the world market slumped to historic lows in April with Europe’s Brent North Sea falling to as low as $15 a barrel, and US benchmark, West Texas Intermediate (WTI) briefly entering negative territory.
In Tanzania, prices of petroleum products were slashed to ten-year lows effective last Wednesday to reflect declining global prices.
The Energy and Water Utilities Regulatory Authority (Ewura) - which regulates local prices - cut petrol and diesel prices by 18.65 percent and 16.25 percent respectively.
Kerosene prices were unchanged.However, the recent extension of the output cut announced by members of the Organization of the Petroleum Exporting Countries (Opec) and other key producers sends a signal that the prices may rise again in the world market in the near future.
“It’s obvious that these countries want to limit supply  and this means prices will rise if the demand remains constant or increases,” said Mr Raphael Mgaya, executive director of the Tanzania Association of Oil Marketing Companies.“For Tanzania, the effect will be felt after two months if the prices rise today.
That is because of the current importation arrangements under the bulk procurement system,” he added.
Opec members  led by Saudi Arabia  and other key oil producers (notably Russia) agreed on Saturday to extend historic output cuts through July, as oil prices tentatively recover in the wake of easing coronavirus lockdowns.
Th2 13-member oil cartel and its allies decided to extend by a month the deep cuts in May and June as agreed in April to boost prices, Opec stated.But Mexico  which had already made it clear ahead of the talks that it “could not adjust... production further” - announced that it would not be complying.
“All participating countries... agreed to the option of extending the first phase of the production adjustments pertaining to May and June by a further month,” the Opec statement said.
Under the terms of the April agreement, Opec and the so-called ‘Opec+’ pledged to cut out-put by 9.7 million barrels per day (bpd) from May 1 until the end of June. The cuts were then to be gradually eased from July  to 7.7 million bpd until December.