By Susan Edmunds of RNZ

Oil prices have fallen sharply on news of a potential ceasefire and the reopening of the Strait of Hormuz, but will drivers get any relief at the petrol pump?

Immediately after the announcement on Wednesday morning, the price of Brent crude oil fell about 16% to US$92 ($157).

Westpac chief economist Kelly Eckhold said the price drop could be consistent with petrol prices falling about 20c per litre to roughly $3.30 a litre for 91.

“The number is obviously entirely contingent on things staying around where they are for at least the next few days… some of the risk premium in the oil markets has come out with this announcement, so you would expect there to be a little bit of relief associated with that.”

Infometrics chief forecaster Gareth Kiernan said he did not expect any immediate relief for motorists.

“There’s still the month-long ‘air bubble’ in the oil supply that needs to work its way through the system before supply conditions can be considered to have returned towards normal. The Brent oil price that is quoted as having fallen is effectively the futures price for oil in June, but prices for oil physically delivered today have been much higher.

“Beyond the Brent oil price, I’d be keeping a close eye on how Dubai or other Middle East oil prices are tracking, because they had been considerably higher than the Brent price, as well as how refining margins or the crack spread across Asia are evolving. With respect to the latter, we had seen continuing increases in recent days that were likely to push diesel over $4 per litre in the short term, so there might actually still be more increases in the immediate future before we start to see retail diesel prices decline.”

He said at US$90 to US$95 a barrel, oil prices were still well above their pre-conflict levels.

“Even if there is eventually some flow-through of the ceasefire announcement into actual oil becoming more available, we’re still talking about petrol prices comfortably over $3 per litre at the moment. Of course, oil prices might moderate further once ships start transiting through the Strait of Hormuz again and markets become more confident about the veracity of the ceasefire – noting that it’s only a two-week ceasefire at this stage. But it’s going to be at least several weeks before the disruption to the supply chain that we’ve seen is rectified and fuel supplies might have returned to something approaching normal.”

AA’s petrol price spokesman Terry Collins said there would need to be a more sustained move to end the conflict before prices came down for New Zealand motorists.

There could still be insurance problems for boats travelling through the Strait of Hormuz, even if it was opened, he said.

RNZ