Here is the expected petrol price for February

Mid-month data from the Central Energy Fund (CEF) points to a smaller drop in prices for petrol and diesel in February 2023 due to rising international petroleum costs.

According to the CEF’s data, as at 13 January 2023, petrol prices are expected to come down by as much as 25 cents a litre, while diesel is on track for a 50 to 60 cents per litre drop.

These are the expected changes:

• Petrol 93: decrease of 18 cents a litre;
• Petrol 95: decrease of 25 cents a litre;
• Diesel 0.05%: decrease 50 cents a litre;
• Diesel 0.005%: decrease of 63 cents a litre;
• Illuminating paraffin: decrease of 46 cents a litre.

The Department of Energy has stressed that the daily snapshots are not predictive and do not cover other potential changes like slate levy adjustments or retail margin changes, which are determined by the department at the end of the month, taking all variables into account.

The DoE makes adjustments based on a review of the entire period. Furthermore, the outlook can change significantly before month-end. Ultimately, the expected price changes are contingent on current market conditions persisting through the end of the month.

Local fuel price fluctuations are impacted by two main factors – the international price of petroleum products, driven mainly by oil prices, and the rand/dollar exchange rate used to purchase these products.

In the first half of the month, global oil prices dropped significantly and then rebounded. While this movement is still contributing to an over-recovery in local prices, its impact is lower than at the start of the month. Meanwhile, the rand has remained in a relatively stronger position versus the dollar, boosting the expected drop.

Rand

The rand started the week in a stronger position versus the US dollar, back under the R17 mark, sitting at R16.74 to the dollar in early morning trade.

The rand’s fortunes are invariably tied to global market conditions and sentiment around interest rate hikes in the United States particularly. The local unit gets flung to and fro by expectations around the US Federal Reserve’s interest rate moves, with markets constantly watching for any indication of what comes next.

According to TreasuryOne, the dollar is trading softer overall, which is boosting emerging markets, including the rand. The local currency might even test the R16.70 level, it said.

However, after US data published last week offered hope that inflation is on a sustained downward trend – potentially allowing the US Federal Reserve to slow its pace of policy tightening – this sentiment could easily shift and put the dollar on top again.

Add to the mix local factors like persistent load shedding and significantly higher electricity prices in the coming months, the rand is likely to have a volatile path forwards.

For now, the rand’s positioning is contributing to an over-recovery of 14 to 17 cents per litre for petrol and diesel, respectively.

Oil

After favouring a narrative of ample supply and low demand – driving down prices – oil markets have rebounded as China opening up after a failed zero-Covid policy has led to yet another shift in sentiment.

The drop in prices was largely driven by market sentiment around demand, with analysts holding a dim outlook for demand coming from industrious nations like China – while supply concerns eased.

However, with the world’s second-biggest economy suddenly making it clear that it is open for business, the outlook for demand has switched up.

According to Bloomberg analysis, China’s reopening could lead to a surge in global economic activity – but this may come with a hike in oil prices. Indeed, oil is currently trading closer to $85 a barrel than the $77 a barrel seen a week ago.

China ditched Covid-19 curbs in late 2022 after years of strict lockdowns. That’s set to improve economic activity and mobility, with analysts forecasting that oil demand in the top crude importer will likely hit a record.

“Crude has had a bumpy start to the year, collapsing in the opening week before rebounding. In addition to China’s swift pivot, support for crude prices in recent sessions has come from growing expectations that the Federal Reserve is now nearing an end to rate hikes, and a weakening dollar. Traders are also tracking the impact of sanctions on Russian oil and product flows,” Bloomberg said.

Traders are being cautious, however, and will still gauge how quickly China will be able to recover, as well as what it means for the market going forward.

Currently, international petroleum product prices are trending higher, contributing to a smaller over-recovery in local prices of between 3 cents and 45 cents per litre.

This is how the expected price changes could reflect at the pumps:

Read: Here is the official petrol price for January