Hungary will in February review and possibly extend a cap on fuel prices imposed for a three-month period from Monday, Prime Minister Viktor Orban told public radio on Friday, sparking a renewed sell-off in oil and gas group MOL's (MOLB.BU) shares.
Orban's government announced the cap last week in its latest effort to shield consumers from sharp price rises and keep a lid on surging inflation in the run up to a close election race next year.
Hungary's inflation surged to an annual 6.5% in October, above expectations, driven in part by a 30.7% increase in fuel prices.
The cap means that for a three-month period from Nov. 15, petrol and diesel prices cannot exceed 480 forints ($1.50) per litre at fuel stations, below previous prices of more than 500 forints, a key psychological level.
"You cannot sit back when prices are sky-high and when the dust settles, it becomes clear that they will not come back down overnight," Orban said, noting that higher fuel costs were also seeping into prices across the economy.
"This (price cap) will remain in place until February," Orban said. "If necessary, we will extend it, if not, then we will forget it."
MOL shares extended losses on Friday, hitting two-month-lows and underperforming the wider Budapest index (.BUX), which was also under pressure from a surge in COVID
-19 cases to record highs in Hungary and a lockdown in neighbouring Austria.
Orban's remarks about a possible extension of the fuel price cap could also be pressuring MOL shares, a Budapest-based stock trader said.
Economists at brokerage Erste Investment said the deteriorating Hungarian COVID
-19 situation could prompt Orban's government to extend a special legal order possibly until next year's election, paving the way for an extension of the fuel price cap.
In September, Orban extended a moratorium on loan repayments, one of his first responses to the coronavirus
pandemic, before finally phasing it out for most borrowers this month.
A survey by think tank Zavecz Research published this week showed Hungary's united opposition retaining a four-point lead over Orban's ruling Fidesz in November, while the ranks of the undecided fell sharply.
Hungary's central bank, which expects inflation to exceed 7% in November, has pledged a "more extensive and longer lasting" policy tightening to curb inflation risks and anchor price expectations.
($1 = 320.29 forints)