A report by the Central Bank of Kenya has projected further depreciation of the Shilling and a fall in international oil prices ahead of the fuel review by the Energy and Petroleum Regulatory Authority (EPRA) slated for Sunday.
In its weekly report, the monetary policy regulator noted that the dollar had gained more on the Shilling, with the local currency exchanging at Ksh160 against the greenbuck by the close of Friday.
According to the report, the Shilling shed close to Ksh2 to the dollar within a week. However, CBK asserted that the Kenyan currency was still stable.
"It exchanged at Ksh159.85 per US dollar on January 11, compared to Ksh157.39 on January 4," read the report in part.
On the other hand, as of Friday morning, international prices had declined owing to increased supply from non-OPEC oil producers such as the US.
However, the recent air strikes by the US and the United Kingdom in Yemen caused the prices to shoot up again by close to 4 per cent.
Market analysts project that with the escalated tensions resulting from the Israel - Palestine conflict, international oil prices may continue to rise, a move that could affect pump prices beginning in February.
"The US and UK launching air strikes on Houthis in Yemen are adding to the risk of Iran being directly drawn into the conflict which would threaten oil supplies.
"The creeping widening in the Israel/Hamas conflict poses a risk to global growth and inflation, for example, Houthi attacks on Red Sea shipping adding to transport costs as ships have to go around Africa," chief economist Shane Oliver was quoted by Reuters.
Meanwhile, the recent escalation of the conflict is not expected to majorly affect the prices to be announced tomorrow. However, owing to the depreciation of the Shilling, pump prices could remain high.
This is because oil is imported in dollars. Additionally, EPRA uses parallel dollar rates which are higher.
Currently, a litre of super petrol is retailing at Ksh212.36, Ksh201.47 for diesel, and Ksh199.45 for kerosene. This was after the price reductions effected in December.
