Liam Dann: Oil price slumps despite Saudi attacks

Petrol pumps - Petrol prices should start to fall as the global oil price slumps - NZME File pic

In what looks like good news for motorists the price of oil has now fallen below the level it was prior to the Saudi oil refinery strike.

But the bad news is that the increasing pace of the global economic slowdown is behind the slump.

The benchmark Brent Crude oil price has fallen 12 per cent since a post-attack peak on September 16.

In the US the West Texas Crude oil price has slumped 15 per cent.

Local petrol prices also spiked after the attack on September 14 and there were fears further unrest in the middle-east would see prices spike higher.

The drone strike on the Aramco's Kuirais oil field in Buqyaq immediately shut down five per cent of the global oil production and was described as the biggest single-day disruption to oil markets since the Iraq war in 1991.

A man stands in front of the Khurais oil field in Khurais, Saudi Arabia, Friday, Sept. 20, 2019, after it was hit during a September 14 attack. AP photo.

But industry analysts say the Saudis have surprised with the swift pace at which it has repaired the damage and restored production

Local petrol companies were quick to lift the pump prices after the attacks with both Z Energy and BP attributing a 6c price hike to disruption.

Local prices had started to fall again says the Automobile Association's petrol analyst Mark Stockdale.

However, assessing the relative falls was complicated by the fact that the kiwi dollar had also fallen since the attacks.

That meant the costs of refined oil to local companies was not falling quite as much as the global commodity price.

So far fears of further unrest in the middle-east have been unfounded despite increased geopolitical tension with Iran, which is accused by the Saudis and US of masterminding the attacks.

Iran denies that and points Yemeni rebels who have claimed responsibility.

Meanwhile - in what isn't such great news for consumers in the long run - the increasing pace of the global economic slowdown is causing expectations of fuel consumption to fall.

Last night the World Trade Organisation (WTO) warned that it now expects trade volumes to grow by just 1.2 per cent in 2019, down from the 2.6 per cent it predicted in April.

It also cut its global economic growth forecast from 2.6 per cent to 2.3 per cent.

"The darkening outlook for trade is discouraging but not unexpected," WTO director-general Roberto Azevêdo said. "Resolving trade disagreements would allow WTO member [states] to avoid such costs."

He warned that businesses were delaying investments and hiring amid the uncertainty which was squeezing growth and putting the prospect of better living standards at risk.

That suggests little chance of local business conditions picking up in the short term, although at least lower fuel costs might give some businesses something to smile about.

Certainly, as lower petrol prices feed through into the inflation outlook there appear to be no barriers to further rate cuts by the Reserve Bank.