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Tuesday, 8 January 2019

Gov’t to implement fuel pricing mechanism on 95 octane gasoline in 2Q2019

95 octane fuel could move up or down 10% thanks to new price mechanism: The price of 95 octane gas may fluctuate up or down by 10% when the a new pricing mechanism that pegs it to the global market comes into effect in April, according to a government decree establishing the committee that will manage mechanism published in the Official Gazette. That grade of gasoline is no longer subsidized. The new pricing committee, which will include representatives from the oil and finance ministries, will be in charge of issuing quarterly recommendations based on Brent crude and the exchange rate. The Oil Ministry will proceed based on the recommendations, which will aim to ensure the efficiency of the pricing mechanism and tie up any loose ends.

New pricing mechanism to be applied to other fuel grades, an unnamed official had told Bloomberg. The government plans to extend the pricing mechanism for other grades in June after it lifts subsidies, effective in September.

Price won’t necessarily change in April: The price could just stabilize, Oil Minister Tarek El Molla told Reuters. “This does not mean an increase in price during the second quarter of this year,” he said. “The price may fall or rise or stabilise at its current rate.” The price of 95 octane gasoline will remain the same until 2Q2019 and potential cuts or raises will not exceed 10%.

Not if Saudi has anything to say on the matter: Meanwhile, Saudi Arabia is showing us again that what is good for some EMs is not good for others, as it plans reduce crude exports by up to 800,000 bbl/d from November levels. The oil exporter is hoping to see prices reach USD 80/bbl, according to the Wall Street Journal. The spike in all prices to USD 80/bbl last year had contributed to a strain in Egypt’s budget. Brent crude had gained 2% last Friday to 57.06/bbl, they’re highest since 19 December, following OPEC cuts.

Background: Disbursal of a USD 2 bn tranche of the IMF extended fund facility to Egypt had reportedly been delayed from December to January because the multinational organization was waiting for Egypt to announce plans to implement the mechanism.

The Oil Ministry is in full damage mode, as the story has been the biggest thing on the airwaves.  Oil Ministry Spokesman Hamdy Abdel Aziz told Al Hayah Al Youm’s Khaled Abu Bakr that the mechanism will mean that 95 octane, a gasoline grade only used by 4% of the population, will be pegged to international prices (watch, runtime: 06:06). Abdel Aziz also told Hona Al Asema that the 10 percent average is meant to protect the people’s interest (watch, runtime: 05:47). The spokesman also phoned Masaa DMC's Eman El Hosary (watch, runtime: 02:56) to discuss the same ordeal.

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