The prices of fuel oil fall below $90 per barrel, causing a brief lull in the global oil market. An economic slowdown in China and excess commercial stockpile in the US are the main causes for a decline in oil prices.
The oil market had previously been agitated by worries about the Iran-Israel conflict, according to a Reuters report published on Wednesday.
This decline offers an ample opportunity for Bangladesh as it implemented an automated fuel-oil pricing formula on March 8, poised to align its domestic prices more closely with international trends. According to reports, the new fuel oil prices will be revealed each month in line with the world market. The new price for April has not yet been revealed.
However, recent developments in China and the US have contributed to a downturn in prices, providing a moment of interval.
Brent crude prices experienced a decline of 56 cents, settling at $89.46 per barrel, while West Texas Intermediate crude dropped 63 cents to $84.73 per barrel. The trajectory
of global oil prices remains closely linked to Israel's response to the conflict, with potential for further drop or spike, depending on the situation.
A moderate reaction from Israel could potentially lead to further price drop, with projections suggesting a decrease to as low as $80 per barrel in the coming weeks. Conversely, any escalation in the Middle East conflict could push prices beyond the $100 mark.
Iran's pivotal role in global oil production adds another layer of complexity to the situation. As the seventh-largest oil producer worldwide and the fourth-largest within OPEC, Iran's output of 3 million barrels per day significantly influences global supply dynamics.
Additionally, the strategic importance of the Strait of Hormuz, through which 20% of the world's crude oil is transported, amplifies concerns over potential disruptions to oil flow in the event of heightened conflict.
Bangladesh's recent adoption of an automated fuel-oil pricing formula on March 8 marks a significant step towards aligning domestic prices with international market fluctuations. The downward adjustments made in response to global trends reflect the effectiveness of this mechanism.
Following the implementation of the new pricing formula for the month of March, the price of diesel and kerosene has decreased marginally from Tk 109 per litre to Tk 108.25 per litre due to the downward adjustments for March. Petrol costs Tk 3.0 per litre, down from Tk 125 previously, and now only Tk 122. The price of octane has been re-fixed at Tk 126 per litre, which is Tk 4.0 less than its previous price of Tk 130.
On February 29, the government released the "Automatic Fuel Oil Pricing Guidelines," which said that fuel oil prices would be automatically set in accordance with global market rates.
As long as international petroleum prices remain relatively low, Bangladesh stands to benefit from the new price-adjustment mechanism, offering potential savings for consumers. Industry insiders say that the government's proactive approach to fuel pricing, in line with global market rates, positions Bangladesh favourably amidst evolving geopolitical dynamics and fluctuating oil prices.
The historical context of oil price fluctuations underscores the significance of geopolitical tensions. Earlier in 2022, crude oil prices soared following Russia's military intervention in Ukraine, highlighting the sensitivity of the market to political unrest.
Recent market trends reflect the volatile nature of geopolitical events. Prior to Iran's attack on Israel, oil prices surged on anticipation of increased tensions in the Middle East, with Brent crude reaching a six-month peak at $92.18 per barrel.