Home / Oil & Gas / Fuel prices rise in Morocco

Fuel prices rise in Morocco

Except for major events or new periods of containment in the world because of the Covid-19, the trend in hydrocarbon prices becomes bullish again. Pump prices have gained up to 70 cents in a month. And a further increase of an average of 30 to 40 cents is expected on July 1.

Pump prices, which had dropped considerably during March and April, have rebounded since May. The liter of diesel is currently approaching MAD 8 whereas it was close to MAD 7 a few weeks ago.

“The resumption of economic activities around the world has had an effect on demand. Purchases and future commitments have resumed driving prices up. The market is in rising price curve as expected and this upward trend was predictable,” explains a market source.

Between mid-May and mid-June, the price of refined diesel increased by an average of $ 130. The average price of platts went from 230 dollars to 360 dollars per ton, according to our sources.

The 8 dirhams mark will be crossed the next fortnight

“Experts expect the uptrend to continue until prices resume their pre-crisis levels of around 600 dollars per ton,” said our source. “It remains to be seen whether this recovery will take weeks or months. In other words, whether we will reach pre-crisis price levels in 2020 or this will last until 2021”.

“In all likelihood, the upward curve will be smooth because it will have to follow the growth curve of the countries. Growth that the countries want to be gradual and smooth,” adds our source.

On the basis of these forecasts, prices at the pump will therefore increase successively during the next fortnight until they reach pre-crisis levels, thus exceeding MAD 9.5 per liter of diesel.

This will be done gradually. The liter of diesel is currently around MAD 7.90. It will register an increase during the next fortnight equivalent to 30 or 40 cents on average, thus exceeding the MAD 8 mark.

Morocco did not profit from the decline

This recovery in prices which started in the second half of May coincides with the resumption of economic activities on May 25 and the start of gradual deconfinement in certain regions of Morocco on June 10.

Thus, Moroccans are gradually returning to normal life to find another market reality. They ultimately did not take advantage of the drop parenthesis because they were in confinement.

“The Moroccan consumer whether he is an end customer or a professional customer did not benefit from it because of the confinement and restrictions during this period. Even professional customers did not have visibility and were not informed enough to benefit of the opportunity to build up stocks,” analyzes our expert.

Even the State did not take advantage of the context to allow the country to replenish its strategic stocks at a low price. The intention is there through the decision to use the storage capacities of the Samir. The process is certainly launched via a contract which is being finalized between the syndic of the Samir and the ONHYM allowing the latter to exploit the storage capacities of the refinery, but it takes too long.

“Every day lost is a lost margin. Already we have lost an average of $ 130 per tonne in a month,” says our source. There was still time to act, but it must be done as soon as possible to maximize the gain, otherwise it will no longer have any interest,” comments our source.

Not everyone is in the same boat

What about operators in the sector? Did they take advantage of this context of falling prices to build up stocks? According to our source, there are two distinct periods to analyze and two categories of operators.

Prices fell quickly. The operators were going to suffer losses during the months of March and April because they lowered prices at the pump knowing that the purchase price was higher. “They were partially saved by confinement. There were not many sales during this period so losses were minimized.”

At that time the question arose: should we continue to stock up when the price trend is down and demand at half mast? Faced with this question, the operators had two different answers.

One category of operators, the majority, reduced or stopped their supply of hydrocarbons during the downturn. “They already had stocks that were depreciating. They were afraid to buy new stocks and that prices continue their decline especially since market demand was down sharply due to containment,” analyzes our source.

This category did not stock up and was content to manage its stock while waiting for better days.

The second category, a minority in the sector, maintained its supplies despite the context hoping that the price trend will reverse. “These operators did not build up overstock, they just maintained their supply despite the drop in sales. They took a risk which paid off in hindsight. They bought at a low price and now the trend is upward so they earn margin,” analyzes our expert.

The question is whether the latter will decide to pass on part of this gain to consumers by not impacting all of the future increase. “It will depend on their trade policy. If they want to gain market share, they will be able to pass on part of this margin gained to consumers and keep prices low at least while these stocks are used up,” analyzes our source.

Check Also

OPEC grants a loan of 100 million dollars to Morocco

Morocco and the OPEC Fund for International Development have signed a $100 million loan agreement …

Leave a Reply