Analysis
The increase in petrol and diesel prices by the Ministry of Mines and Energy for September 2023 was a response to the complex interplay of global oil market dynamics. Brent oil rallied to $90 a barrel for the first time since November as key OPEC+ producers extended supply cuts that have tightened the crude market.
Saudi Arabia extended its unilateral production cut by another three months as it seeks to support a fragile global market. The move will hold output at about 9 million barrels a day, the lowest level in several years. Russia alluded to curbing 300,000 barrels a day of exports through year-end. As a result, oil inventories declined globally. Additionally, the global oil demand is increasing boosted by summer air travel, power generation, and petrochemical operations in China. Consequently, the combination of decreased supply of oil due to OPEC+ agreements and increased demand from various sectors has led to high oil prices.
To address the significant under-recoveries caused by these global dynamics, the Ministry has decided to increase the prices of petrol and diesel effective today September 6, 2023. Petrol price increased by 120 cents per liter, resulting in a new price of N$20.98 per liter while diesel prices(50 ppm) and (10 ppm) increased by 170 cents per liter, bringing the new price to N$20.75 per liter and N$20.95 per liter respectively.
Figure 1: Namibia Fuel Prices, January – September 2023
Source: Ministry of Mines and Energy
Outlook
We expect oil prices to remain on the current trend in short-term, stemmed by the anticipated oil production cuts by the OPEC+ countries. Furthermore, the global oil demand boosted by summer air travel, power generation and petrochemical operations in China, and the further currency depreciation against the US dollar boosts the chances of possible elevation in fuel prices.
The Namibian uranium industry is distinctive because it operates in a region with a variety of uranium deposits and high levels of biodiversity and geomorphology cultural preservation value. Almost all Namibian uranium activities occur in the central western Erongo Region of the country, a region that is characterised by its aridity, vast desert landscapes, scenic beauty, high biodiversity and endemism, and heritage resources. The region makes important contributions to Namibia’s economy, and mining plays a major role in making this contribution. Namibia is one of the world's top producers of uranium ranking second only to Kazakhstan, (2022). The country produces around 10% of the world’s global uranium production mainly from its large uranium mines with Rossing Uranium and Swakop Uranium. Notwithstanding this, there are also a number of small uranium exploration projections currently ongoing.
The mining and export of uranium contribute significantly to GDP export earnings and employment. The sector contributed around 2% to GDP in 2022. Data from the NSA indicate that a notable increase in uranium export earnings was observed over the past 5 years. Uranium export earnings surged to N$3.5 billion for quarter 1 of 2023 from N$1.0 billion recorded in the same period in 2022. This could be attributed to a stronger uranium export volume and the depreciation of the domestic currency. The higher export volumes were triggered by a low base effect, as shipping vessels were unavailable during the corresponding quarter of 2022. On a quarterly basis, however, uranium export receipts declined by 28.4% to N$3.5 billion from N$ 4.9 billion recorded in quarter 4 of 2022, explained by the lower volumes exported. Additionally, the data from the Chamber of Mines Namibia indicates that the uranium sector employed about 5772 people in 2022 with only 42 % of permanent employees and the rest are contract-based or temporary casual workers. (Figure 1)
Furthermore, Production of uranium rose both year-on-year (between June 2022 and June 2023 and month-on-month (between May 2023 and June 2023). (Figure 2). This could be due to a recovery from water supply challenges experienced during the previous year. Uranium production rose both on a yearly and monthly basis by 24.2% and 9%, respectively. The international average spot price for uranium stood at U$50.00 per pound during the first quarter of 2023, similar to the level registered during the corresponding quarter in 2022. This suggests that the market conditions for uranium have not experienced any significant shifts that would impact its price and this could indicate the balance between the global supply and demand for uranium. (Figure 3)
Figure 1: Employment in the uranium and overall mining sector, (2003- 2023)
Source: Chamber of Mines Namibia and HEI Research
Figure 2: Uranium Production in tonnes, (June 2022-June 2023)
Source: NSA and HEI Research
Figure 2: Price of Uranium, (January 2019-June 2023)
Source: Cameco and HEI Research
