Oil prices continue to take a beating in the international market even as Kenya readies to export its first batch of crude oil later this month.
Prices have been on a downward spiral over the past three weeks, taking a 13 per cent plunge. Three firms have already been awarded contracts with a combined value of Sh1.5 billion to transport crude oil from Turkana to Mombasa for the early oil pilot scheme.
Prime Fuels Kenya, Multiple Hauliers and Oilfield Movers – are expected to commence the movement of cargo by road in the third week of this month.
Latest data shows oil prices of the indicative West Texas Intermediate (WTI) index are down to $46 (Sh4,738) a barrel and speculative bets are that it might hit $39 (4,017) a barrel by mid-July. Prices have plunged on fears that Organisation of Petroleum Exporting Countries (OPEC)-led production cuts are not doing enough to stem a global supply glut.
On the upside
This means that Kenyan oil could go into the market at a lower price and would not fetch a premium once the Government finds a buyer. On the upside, however, the fall in oil prices is set to be a major boon for the shilling, which is poised to come into a pronged attack from the demand for dollars by companies paying dividends this month and importers of crude oil.
“We know people say petrol importation is a threat to our forex, but we have always imported petroleum worth $7 million (Sh721 million) to $10 million (Sh1.03 billion) and we are prepared,” said Central Bank Governor Patrick Njoroge.
The country’s forex reserves hit historical highs of $8.309 billion (Sh855 billion) on April 28 and have a buffer of $1.5 billion (Sh154 billion) to help the CBK manage exchange rate volatility.