The government is reconsidering a planned hike in fuel prices following the Gaza ceasefire agreement, a government source told EnterpriseAM. The move comes amid expectations that global oil prices will ease, petroleum import costs will decline, and the EGP will strengthen all on the back of the agreement.

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Fuel prices are already dropping: Oil prices fell over 1.5% at the close of Thursday’s trading session, following the signing of the ceasefire agreement between Israel and Hamas. Brent crude futures dropped USD 1.03, or 1.55%, to settle at USD 65.22 per barrel, while West Texas Intermediate futures slipped USD 1.04, or 1.66%, to sit at USD 61.51 per barrel.

The government bases domestic fuel pricing on three key metrics — global oil prices, the exchange rate, and supply and demand — all of which could shift following the ceasefire, the source said. The expected return of traffic to the Suez Canal will also help boost the EGP and FX revenues, improving Egypt’s position and reducing fuel import costs.

Local consumption is also falling, with reserves enough to cover needs until the end of the year. A government source told EnterpriseAM last week that gas import targets for 4Q were cut by around half due to a dip in demand.

Two factors could still change the outlook for fuel pricing. The first is Egypt’s upcoming talks with the IMF in Washington during the Fund’s annual meetings later this month. The second is the broader economic impact of the Gaza ceasefire, which is expected to improve key economic indicators.

Cost-recovery ratios could also be revised down, giving inflation room to fall and supporting social spending while staying on track with the IMF-backed reform program, the source added.

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