Petrol prices in UAE to drop by 8.4 pct

At the start of August, the UAE removed its longtime subsidy on petrol, causing prices to rise

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Petrol prices in the United Arab Emirates in September will next month drop by 8.4 pct to $0.53 (1.96 dirhams) a liter, the energy ministry said on Thursday, as global oil prices continue a downward trend.

At the start of August, the oil-producing UAE - which is looking to balance its state budget after low energy prices put a strain on revenues - removed its longtime subsidy on petrol, causing prices to rise by 24 percent. At the same time, tariffs on diesel were eliminated, lowering prices for industrial vehicles.

The cutting subsidies and letting fuel prices rise could boost UAE state finances, which have been weakened by a plunge of oil export revenues since 2014 due to the fall in global crude prices.

Low oil

The International Monetary Fund projects the UAE will post its first fiscal deficit this year since 2009; it estimates the country spends $7 billion annually on petroleum subsidies.

Although subsidies have been dropped, a government prices committee would announce on the 28th of each month prices for the following month, basing its decision on “average global prices with the addition of operating costs,” according to announcements in July.

Although oil markets moved up from six-and-a-half-year lows reached earlier this week, investors are still worried about a huge oversupply in the oil market which is depressing oil for immediate delivery and filling stockpiles worldwide.

“The trend is strong and down. However, do not be wrong footed by a correction higher,” PVM Oil Associates technical analyst Robin Bieber told Reuters. “Few markets head forever in one direction with no respite.”