• Oil prices see biggest single-day jump in 2 years
• CPC assures steady supplies
• Impact on local prices in 1-2 months
• Stocks secure for up to 45 days

The Ceylon Petroleum Corporation (CPC) yesterday (14) ruled out any immediate impact of rising global fuel prices on local fuel prices.

Oil prices had surged sharply on Friday (13) following escalating tensions between Israel and Iran, marking the largest single-day increase in over two years. 

US crude oil (WTI) jumped 7.26%, settling at $ 72.98 per barrel, while Brent crude rose 7% to $ 74.23 per barrel.

However, speaking to The Sunday Morning, CPC Managing Director Dr. Mayura Neththikumarage said that at present there had been no delays, no diversions of any ships, and no messages informing them of any such developments. 

“We continue to remain highly vigilant, but as of now there are no issues,” he said. “However, we are staying alert and closely monitoring how the situation might affect us in the future.”

Dr. Neththikumarage added: “We do not face any direct impact because we are not purchasing anything from Iran or that region, so essentially, there is no direct effect on us. The only possible consequence would be if Iranian supplies get disrupted, in which case the demand for the supplies we are currently receiving might increase. That is the only concern for us at the moment.”

He further clarified that Sri Lanka sourced products from the Gulf region but not from Iran or Iraq. 

“We have no dealings with those countries, so there is no direct impact on our operations. The issue is not that demand for our products will increase, but rather that the countries currently supplying oil and gas to other nations might face challenges. If that happens, they will need to secure their supplies from elsewhere, which could indirectly increase demand on the sources we use.”

“Primarily, we purchase through traders. These traders have the flexibility to buy from multiple locations. We only get information about the source when the loading takes place. We are not buying directly from any country or from government entities,” he said.

“Since we buy through traders, they have various supply options – places like Singapore, Brunei, and the Arabian Gulf – which makes our supply chain more secure. Thanks to this, we are not tied to any single country for our product sourcing,” the CPC Managing Director added.

He noted that because of this flexibility, there should be no disruption in supplies. The only possibility is an increase in product prices. However, this potential price increase is unrelated to shipping or trade charges, as those have already been factored in up to December. The concern lies solely with possible increases in international product prices.

“Even if prices rise globally, it won’t have an immediate effect on us. If international product prices increase, we might start feeling the impact in about one to two months, not right away,” he explained.

Regarding the country’s current stock situation, Dr. Neththikumarage said: “We normally maintain about 20-30 days of finished product inventory, depending on the product type. In some cases, we even have up to 45 days of stock. Additionally, we have crude oil stocks, which can be refined into finished products as needed, giving us extra security.”

“We have enough finished product and crude stock in hand and with our multiple sourcing options through traders, we do not foresee any immediate disruption to our supply,” he concluded.

Earlier in the day, both benchmarks had soared by as much as 14% and 13%, respectively – the biggest single-day percentage gains for both oil contracts since March 2022, shortly after Russia’s full-scale invasion of Ukraine. On a weekly basis, it also marked the strongest gains for crude prices since October 2022.

The surge reflected immediate concerns about energy supply disruptions and growing fears that this geopolitical conflict could be more prolonged than previous episodes between Israel and Iran. 

Market analysts noted that if Iranian oil were to be removed from the market, prices could climb an additional $ 7.50 per barrel. More critically, any threat to exports passing through the Strait of Hormuz – the world’s most vital oil chokepoint – could push prices as high as $ 100 per barrel.

Despite the sharp rally, the Organization of the Petroleum Exporting Countries (OPEC) pushed back against calls for an emergency release of oil stockpiles, stating that there were no current market dynamics justifying such action.

Analysts also warned that rising oil prices could reignite inflationary pressures globally, complicating central banks’ interest rate decisions. 

Overall, the escalation has injected a significant risk premium into the oil market, with expectations of further volatility in the days ahead.