Bad news for petrol prices in South Africa continues
Despite fresh strength in the rand versus the US dollar, and global oil prices remaining relatively stable, petrol price recoveries remain stubbornly in the red, with diesel heading in the same direction.
Data from the Central Energy Fund (CEF) for the end of the third week in September shows petrol prices are still showing an under-recovery, pointing to a hike in October.
While the the under-recovery has reduced, thanks to a stronger rand, the general trend in the contribution from international product prices points upwards.
This means that, even though the stronger rand is contributing to a positive recovery in priced of around 11 cent per litre, the contribution from international product prices is still between -16 and -24 cents per litre.
This is the outlook at the end of week three:
- Petrol 93: increase of 5 cents per litre
- Petrol 95: increase of 13 cents per litre
- Diesel 0.05% (wholesale): decrease of 8 cents per litre
- Diesel 0.005% (wholesale): decrease of 6 cents per litre
- Illuminating paraffin: decrease of 12 cents per litre
The positive spin on the data is that the under-recovery is lower than at mid-month by a couple of cents per litre, with the momentum driven by the stronger rand.
The downside to this is that any weakness in the local unit is likely to push the under-recovery further into the red.
Looking at diesel prices, the news is still good: price recoveries for diesel are still in the black, with an over-recovery of around 7 cents per litre.
The bad news for diesel is that the upward trend of international product prices has narrowed the over-recovery as well, and prices are moving closer to the neutral position, from a circa 20 cents per lire position at the start of the month.
This means that any rand weakness or acceleration in product prices, particularly oil, could swing recoveries into the red by month-end, and drivers could also see a small hike in October.
The main saving grace for fuel price recoveries is the rand, which has been remarkably resilient amid geopolitical shocks and global trade barriers.
The local unit strengthened this week as the US Fed cut rates by 25 basis points, increasing the rate differential between the US and South Africa to about 300 basis points.
With the South African Reserve Bank electing to hold rates, the differential remains in place, making South Africa more appealing to investors.
The rand has also largely shrugged off the implementation of a 30% tariff on exports to the United States and weak economic indicators.
Oil markets
Working against fuel price cuts, oil is proving to be relatively volatile this month—though it remains bound to a narrow range on the lower-end of historic pricing.
However, relative to last month, the fluctuations have been deeper.
The Brent crude oil price spiked to around $70 per barrel this week, driven by heightened supply concerns and geopolitical tensions.
This is far higher than the $66 average for most of August and earlier in September.
While the price has since slipped again—back to around $67 a barrel—reversing the brief gains, the blip will be factored into the average pricing for the month.
The increase came as Ukrainian drones attacked key Russian energy infrastructure, including export terminals and refineries, which raised fears of disruptions in global supply.
OPEC+ production strategies, balancing output increases and cuts, also supported higher prices.
However, according to Bloomberg analysis of the market, the outlook for a global supply surplus outweighed concerns over Russian flows brought by the attacks.
Price support from the Federal Reserve’s rate cut, US President Donald Trump’s calls to stop buying Russian crude and repeated Ukrainian strikes on energy assets has also been short-lived, it said.
“Attacks on Russian oil infrastructure are giving some upside support to prices, but it’s still tempered by a market looking for a surplus in the months ahead,” it reported.
“The oil market looks as though it’s largely ignoring the Fed for now.”
A faster-than-expected output reversal by OPEC+ countries has led the International Energy Agency to predict a record crude supply surplus next year.
That has offset geopolitical concerns and kept prices stuck in a tight range around $67 a barrel.
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