The price of petrol, diesel and kerosene for Tonga will continue to decrease from this month to February, starting from Monday 18 January.

The new retail prices including consumption tax are:

• Diesel 205.09 seniti per litre, 21.01 seniti decrease
• Petrol 218.83 seniti per litre, 8.18 seniti decrease
• Kerosene 138.23 seniti per litre, 20.08 seniti decrease

The Competent Authority said the local diesel prices are now at the lowest level since 2009.

They stated that petroleum prices for January to February this year are mainly determined by the movement of FOB prices in the Singapore market based on last month’s average prices of the daily published Means of Platt’s Singapore (MOPS) benchmark prices.

Crude oil prices fell below USD40/bbl; the lowest since 2008 following OPEC’s inability to agree on production cuts in its meeting on December 4, 2015. Dated Brent ended the month around USD36/bbl. (averaged USD38.21 bbl. for December).

The previous crude price low point in the late 2008 to early 2009 was a result of a sharp decline in demand due to the Global Financial Crisis. That dip was short lived with prices quickly climbing again to over USD60/bbl.

The price decline is supply driven, with the excess in supply expected to continue for the whole of this year. As a result prices are expected to be lower for longer although ultimately the sharp pull back in investment in new exploration will have an impact on future supplies, the Competent Authority stated.

Comparing December last year's average prices with November, crude oil (Dated Brent) is down by USD 6.08/bbl. (13.7 percent). Kerosene and diesel prices fell more than crude down by USD9.80/bbl. and USD10.61/bbl, as refining margins weakened with a slowdown in Chinese demand and limited opportunities to export those products out of the region.

While, petrol prices fell less than crude due to strong regional demand capping the price drop. The freight rate also weakened and the Tonga Pa’anga strengthened, which helped further reduce landed costs locally.

On the outlook, crude oil prices are expected to continue to reduce with abundant supply although renewed tensions in the Middle East between Saudi Arabia and Iran may put some upward pressure on prices.