Fuel prices in Ukraine could grow by 22-24% in 2018, prices of imported gas by 8-11% - ICU
Oil price hikes in the world in 2018 could result in growth of the costs of fuel in Ukraine by 22-24% on average and the cost of natural gas by 8-11%, the ICU investment group has said.
"Oil prices have reached new levels. This is the key factor of higher prices of gasoline, diesel fuel and other fuel in Ukraine this year. With the weakening of the hryvnia, higher prices of oil would result in the increase in the prices of fuel by 22-24% on average compared with 2017," financial analyst at ICU Group Oleksandr Martynenko told Interfax-Ukraine.
Commenting on the increase in global prices of oil early this year to $70 per barrel, he said that these prices are overheated and he believes that they would fall to some $62-64 in the second quarter of 2018.
"In 2018, average price could be $65 or 17% more than in 2017," the analyst said.
He said that the OPEC countries' agreement to reduce oil production favors the balance of the market and contributes to a reduction in the world's stocks in oil storage facilities. Martynenko believes that the growth of oil prices was also facilitated by a significant inflow of speculative assets into oil financial instruments, as well as situational failures in supplies in various regions of the world and political conflicts in the Middle East.
At the same time, higher prices stimulate further growth in oil production, primarily shale oil in the United States, as well as demotivate consumption and reduce profits of oil refineries, Martynenko said.
Regarding natural gas, he said that import prices for the last three years are tied to the spot quotations at key European hubs, which, in turn, are closely correlated with oil prices.
"We expect a 12-15% increase in European spot gas prices in 2018. The forecast takes into account the additional pressure on prices that the expected significant increase in LNG supplies to Europe could have this year," the ICU representative said.
At the same time, he recalled the decision of the Arbitration Institute of the Stockholm Chamber of Commerce, as a result of which the average price for imported natural gas for Ukraine could grow by 8-11% due to the resumption of supplies from Russia.
According to ICU, the price of Russian gas will be lower than the price of European suppliers by the cost of transportation from hubs to the EU border across Ukraine: on average it is about $10 per 1,000 cubic meters, or 4% of the average price of imported gas in 2017.
At the same time, the resumption of supplies from Russia potentially deprives Ukraine of additional revenue for transit of gas of approximately $112-140 million, based on the average cost of transit through the country at $28 per 1,000 cubic meters, Martynenko said.