Bad news for petrol prices in April

 ·22 Mar 2024

The mixed outlook for fuel prices in South Africa remains, with petrol prices still lined up for another hike in April, while diesel prices are set to come down.

According to the latest data from the Central Energy Fund for the end of week three of March, petrol prices are showing an under-recovery of around 18 cents per litre – slightly higher than last week – while diesel has an over-recovery of around 32 cents per litre.

While petrol prices are still in line for a hike, it’s worth noting that this is down significantly from recoveries at the start of the month, where prices were lining up for a R1.00 hike.

The reduction in under-recoveries – and the move into over-recovery for diesel – are thanks to a stronger rand relative to last month, as well as a lower oil price in rand terms.

If these recoveries follow through to the end of the month, this should provide some relief to motorists using diesel, as well as various industries that rely on diesel to operate.

This should also translate to at least some mild relief to inflation after fuel price hikes in February resulted in the inflation print for that month being higher than expected at 5.6%.

According to Investec chief economist Annabel Bishop, fuel prices have kept the pressure on inflation since February, when the fuel price rose by 75c/litre, along with private vehicle operation costs.

“March recorded a petrol price increase of R1.21/litre, which will exert some marked upwards pressure on inflation in that month. Overall, fuel prices have been adding to volatility in the inflation figures,” she said.

“April is currently on course for only a tiny petrol price hike… as the international Brent crude oil price has dropped lower in rands.”

This was echoed by Nedbank economists, who also expect a price hike in April.

“Petrol prices increased by another 5.2% mom and 6.5% yoy in March, while gains in global oil prices have
offset the slight appreciation of the exchange rate, pointing to more fuel price increases in April,” the bank said.

Sinking prospects for a better result for petrol prices is the tweaking of the rand this week.

The rand has pushed back above R19 to the dollar (currently trading at R19.01) off of sentiment pointing to global interest rates sticking higher for longer.

While the US Federal Reserve insists that rate cuts are coming, markets are now only pricing in reduction in the latter half of the year. For South Africa, this means delays locally, with economists anticipating a July/September move.

Oil prices, meanwhile, have broken out of the narrow trading range seen for most of the year and pushed higher to above $85 a barrel.

According to Bloomberg analysis, despite weakening in recent sessions, crude oil has still advanced overall in the first quarter.

The range break has come as a result of US inventory drawdowns, OPEC+’s production cuts and as Ukrainian attacks on Russian territory, including against refineries, intensified.

“However, gains have been limited by surging supply from outside the group and a muddled economic outlook in top importer China,” Bloomberg said.

Despite the various influences, the analysts said that oil markets have been relatively calm, and are expected to remain so going forward, with only small bouts of volatility anticipated.

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