South Africa could get its biggest-ever petrol price cut in December

South Africans could be in for some early festive cheer in December in the form of a major petrol price drop.

Commenting on the latest petrol data from the Central Energy Fund, economist Mike Schussler said that the country could be in line for its biggest-ever cut.

“The price of 95 octane should fall by at least 170 cents at the beginning of December. If the current falling trend continues, SA could get an R1.80 decline,” he said.

The Central Energy Fund’s data for the 21 November, showed the following data:

  • A 167 cents over-recovery in the price of 95 petrol;
  • A 164 cents over-recovery in the price of 93 petrol;
  • A 114 cents over-recovery in the price of diesel.

Schussler warned however, that political interference could still play a role before the final petrol price is announced in December.

The rand, meanwhile, has made good ground against the major currencies in recent weeks, firming below R14.00 against the US dollar.

“The rand broke through the R14.00 level and more significantly closed below that level yesterday, which means that the break was sustained,” said Andre Botha, senior currency dealer at TreasuryONE.

“The rand probably enjoyed some positive sentiment from two fronts. One front is the US dollar slipped again yesterday on the back of the market questioning the Fed’s gradual hike stance yesterday and the second front that the market is probably showing its hand with what their thoughts are what the MPC will do today.”

The South African Reserve Bank (SARB) Governor Lesetja Kganyago is expected to announce the Monetary Policy Committee (MPC) decision on interest rates later on Thursday, 22 November.

And against the backdrop of rising inflation expectations, analysts view the decision as difficult to call.

The SARB last cut interest rates in March 2018, when it lowered the repo and prime lending rates to 6.5% and 10%, respectively.

“From what we can gather is that the rate decision will be a tight one, with the market having a slight bias to a rate hike. What makes the decision more interesting is that the inflation number yesterday printed lower than expected which will be one of the cornerstones of the MPC’s decision.

“Should the MPC decide not to hike rates, we could well see the rand above the R14.00 level, said Botha.

Bloomberg reported that oil traded below $55 a barrel as an increase in American crude inventories added to the bearish sentiment with another tweet from President Donald Trump calling for even lower prices.

The Automobile Association (AA) however, cautioned that the petrol price drop in December could be the last one that South African motorists see in a while.

Speaking to EWN, the association’s Layton Beard said that oil production cuts by Saudi Arabia could result in oil supply restrictions as we move into 2019.

“So, while the picture is looking good going into December, we will always caution motorists that every savings they are realising in December, they should keep for 2019 in case the price of fuel goes up again in January and in proceeding months,” he said.

The Department of Energy has final say on the petrol price movements, and will announce official changes at the end of the month. These are the expected changes based on the latest data from the CEF:

Fuel November official December expected
95 Petrol R17.08 R15.41
93 Petrol R16.86 R15.22
0.05% Diesel (wholesale) R16.13 R14.99

Read: Expect a massive petrol price drop in December

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South Africa could get its biggest-ever petrol price cut in December