Bad news for petrol prices in February
Petrol price cuts in December helped ease inflation slightly, the latest data from Stats SA shows – but February is currently looking at breaking the winning streak by delivering the first hike in three months.
Inflation eased slightly further than market expectations, clocking in at 5.1% in December and averaging 6.0% for 2023.
The easing in headline CPI was aided by a significant petrol price cut that month, as well as flat food prices month on month.
For 2024, economists have warned that the inflation trend is likely to reverse for the first few months of the year, with January expected to see inflation climb to 5.8% – even despite a small drop in fuel prices at the start of the year.
February, however, is likely to see inflation numbers come under even more pressure, with the month currently on course for a petrol price hike of 40c/litre.
Petrol and diesel price expectations
According to the latest data from the Central Energy Fund, diesel and petrol prices are currently aligned in their under-recoveries, with petrol showing a likely increase of 43-44 cents per litre in February, and between 40 and 45 cents per litre for diesel.
Both a weaker rand and higher global oil price are contributing to the under-recoveries.
While the rand has pulled back below R19 to the dollar on Wednesday, the local unit suffered as global tensions between NATO and Russia caused some chaos in the markets, sending the rand above R19.20 to the dollar earlier in the week.
The unit has been largely range-bound so far in 2024, but even at the R18.90 levels seen on Wednesday is contributing to an under-recovery in prices.
The real culprit for the under-recovery is the oil price, however.
According to Bloomberg analysis, oil prices have edged higher as signs of lower inventories and tensions in the Middle East outweighed expectations for more supply over 2024.
Global benchmark Brent inched toward $80 a barrel after starting off the year around $75 a barrel. Overall, it has been confined to a narrow range, but geopolitical risks have countered expectations that supplies from producers outside OPEC will continue to expand.
The main source of tension comes from US-led strikes against Iran-backed Houthis in Yemen intended to halt attacks on vessels in the Red Sea.
Analysts have noted, however, that the impact on oil prices is largely tied to increased costs and risk sentiment, and not actual supplies – thus the lift in pricing may subside.
February’s petrol price changes will kick in two weeks from now, on the 7 February 2024.
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