Oil prices jumped to the highest level in more than three months at the end of trading this week, as Brent barrel reached $68.66 after the United States killed a prominent Iranian military commander in Iraq, which raised fears that the escalation of the conflict in the Middle East may disrupt crude supplies from the region.
A source in the petroleum sector told Daily News Egypt that the Egyptian government succeeded in securing the state budget from fluctuations in global oil prices after it renewed the hedging contract with GB Morgan and Citibank.
He explained that Egypt reviews the value of hedging with banks every three months, up and down, and sets the value according to market expectations and global changes.
The source pointed out that the government fixed the prices of petroleum products for the next three months, in parallel with fixing the value of the hedge against price fluctuations, thus protecting the state’s general budget from any additional burdens.
The automatic pricing committee for petroleum products recently decided to fix the sale price of all three types of gasoline products in the local market at EGP 6.5 per litre for gasoline 80, EGP 7.75 for gasoline 92 and at EGP 8.75 for gasoline 95.
The committee also decided to keep the diesel sales price at EGP 6.75 per litre and fix the selling price of fuel oil tonnes for non-electricity and bakery uses at EGP 4,250 per tonne, in light of the fixed cost of selling and making those petroleum products available in the local market.
The source pointed out that the follow-up committee for the automatic pricing of petroleum products revises the price equation on a quarterly basis, so that the selling price of petroleum products is linked to the local market, with the exception of gas stove and petroleum products used by the electricity and bakeries sectors.
Medhat Youssef, a former vice-president of the Egyptian Petroleum Corporation (EGPC), expected that the price of a barrel of oil would break the $70/barrel barrier in the event of continued military skirmishes between the US and Iran.
He said that the price of a barrel of oil globally exceeded the price specified in the state budget for the fiscal year 2019/20, estimated at $68/barrel. Youssef explained that the government’s hedging against oil price fluctuations globally, contributed greatly to securing the budget and the ability to stabilise the prices of petroleum products on the local market.