The historic price drop impacting the international oil markets has had no effect on prices locally but might provide a window of opportunity for Enemed to purchase product at lower rates for next year, the company’s Executive Chairman, Kevin Chircop, said.

Yesterday, West Texas Intermediate (WTI) in the US traded at 306 per cent lower, settling at $37.63 a barrel, after producers ran out of space to store the oversupply of crude as a result of the drop in demand due to COVID-19. In the meantime, today, Brent crude oil plunged 25 per cent to an 18-year low, trading at just $19 per barrel, the lowest since early 2002.

WTI is extracted from US oil fields in Texas, Louisiana, and North Dakota, while Brent crude is extracted from the North Sea. 

Enemed hedges against Brent crude oil, Mr Chircop explained, but emphasized that it has already hedged its quantities for the next few months, which means the drop in price has no effect in the immediate. 

Moreover, “if the price of crude oil falls by 50 per cent, this does not mean that the price at the petrol pump is also going to fall by the same amount,” Mr Chircop underlined. Indeed, the price of the latter, the refined product, also consists of fixed costs not related to the raw material, he explained.

However, the drop in the markets may pave the way to better purchasing power for product to be used next year, he said. “The Enemed team is constantly monitoring the market and discussing as to whether to prepare to buy more for next year,” Mr Chircop attested, saying that while the market is currently in contango – meaning that its price in the future is expected to be higher than the spot price – the situation is still fluctuating.

Regarding the operational situation currently on the ground, in the wake of COVID-19, the Executive Chairman explained that “orders and shipments of fuel are still happening” with business as usual “so there is no risk of running out of fuel.” In terms of storage capacity, “Enemed has adequate space and there is enough stock for at least 2 months,” he explained. This is also because Enemed buys in line with requirements, he continued.

In terms of aviation fuel – of which there is currently an oversupply due to the shut down imposed by COVID-19 – this is being stored in Enemed’s facilities “with periodical quality checks made so as to ensure that the quality remains the same.”

However, the drop in demand, for both aviation and inland fuels, has had an adverse effect on Enemed’s bottom line, which the company hopes to be able to recover once the economy picks up again, the Executive Chairman said. And, while the firm is assessing the situation daily, “the company is still in a healthy position and does not see in the foreseeable future that it will run into any huge financial difficulties,” he underlined.