Energy

Here is the expected petrol price for July

Staff Writer

 ·15 Jun 2023

Motorists in South Africa are in for a mixed result in July, with a flat global oil price and a slightly stronger rand keeping fuel prices steady.

According to mid-month data from the Central Energy Fund, petrol prices could see a slight drop in July, while diesel is fairly flat, with a small under-recovery for some grades.

These are the expected changes:

• Petrol 93: decrease of 13 cents per litre
• Petrol 95: decrease of 4 cents per litre
• Diesel 0.05%: increase of 7 cents per litre
• Diesel 0.005%: no change
• Illuminating paraffin: decrease of 6 cents per litre

The Department of Energy (DOE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, which consider various factors, at the end of the month.

Domestic fuel costs are primarily governed by the rand/dollar exchange rate and international oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.

Rand

The rand had a vicious month in May, with the latter weeks of the month sending the local unit to its weakest point on record – hitting R19.91 to the dollar.

June has gone far better for the currency, with the rand staging a moderate recovery, hitting as low as R18.20 the dollar this week.

The initial weakness was driven by South Africa’s prevailing power crisis and geopolitical missteps by the national government, which gave the impression that it was cosying up to Russia despite its stated stance of neutrality.

This impression flagged concerns around secondary sanctions against South Africa by Western nations – particularly the United States – which would decimate the economy.

However, the government has since tried to allay fears around this by reinforcing its neutrality and opening talks with Western nations, cooling some tensions in the market. South Africa’s energy production has also improved enough for Eskom to suspend load shedding for most of the day during the week.

Despite these more positive moves, markets are concerned that at least some trade agreements with the West may already be compromised – and load shedding is still far from being fully suspended. Meanwhile, international macroeconomics is also at play, keeping the rand in volatile territory.

On Thursday (15 June), the rand weakened to R18.40 to the dollar after the US Fed opted to hold interest rates, giving the dollar a boost – although it has signalled that more hikes are to come.

While the rand is in a better position than last month, it is still one of the worst-performing EM currencies. It is still contributing to an under-recovery in fuel prices of around 3 cents per litre.

Oil

Oil prices have remained fairly flat in June, despite efforts from oil-producing nations (OPEC+) to artificially bump prices by cutting supplies.

Oil started May at around $85 a barrel, but ended the month at $75 a barrel. This was the main contributor to the sizeable petrol price cut experienced in June.

Prices in June have not ventured too far from this position, however, remaining fairly range-bound. Oil is currently trading at $74 a barrel, contributing to a very slight over-recovery for petrol, and a bit of both for diesel.

According to Bloomberg market analysis, the drop in oil has been driven by a big jump in US crude stockpiles and the US Fed’s signal that it’s not finished with rate hikes.

“Crude has lost 15% this year amid concerns of a US slowdown and a lacklustre rebound in China’s economy – although futures have traded in a narrow range since early May,” the group said.

China’s apparent oil demand rose 17% last month from a year ago, while industrial output also edged higher. While there have been some bright spots for demand, the generally dour outlook has led to major finance groups cutting their expectations for a rally.

The softer oil price is contributing to a 7 to 16 cents per litre over-recovery for petrol, and a 3 cents per litre for 0.005% diesel. An under-recovery is being recorded for 0.05% diesel at 4 cents per litre.

This is how the current projections would feed through at the pumps:

Read: Shaky ground for petrol prices in South Africa – what to look out for