R1.00 per litre petrol price joy on the cards for South Africa next week

 ·28 May 2024

Month-end data from the Central Energy Fund (CEF) shows that South African motorists are in store for joy at the pumps in June.

The over-recoveries for petrol and diesel have extended even further in the past week, pushing the potential price cut in store to R1.00 per litre.

These are the expected changes:

  • Petrol 93: decrease of 100 cents per litre
  • Petrol 95: decrease of 100 cents per litre
  • Diesel 0.05% (wholesale): decrease of 101 cents per litre
  • Diesel 0.005% (wholesale): decrease of 92 cents per litre
  • Illuminating paraffin: decrease of 81 cents per litre

This is thanks to a much stronger rand and lower global oil prices in May.

While the rand traded on the back foot at the tail end of last week, it had a really strong performance earlier, hitting as low as R18.03/$.

Overall, the rand has remained relatively firm this month and far from the R19.00/$ seen in months prior.

According to Citadel Global director Bianca Botes, with only one day to go before the South Africa elections, the market is taking a wait-and-see approach.

“With the US markets closed for Memorial Day and the UK taking a bank holiday yesterday, the rand’s movement was further muted,” she said.

The rand traded in a narrow range of R18.30/$ to R18.45/$ for most of the day, with lowered risk appetite seeing traders not taking on big positions before this week’s all-important election.

Investec chief economist Annabel Bishop also noted that the rand was under pressure due to global interest rate pressures, with the US Fed/s minutes keeping a hawkish tone on interest rates States-side, putting added pressure on the rand.

Before this, the rand was looking at possibly strengthening under R18.00 to the dollar.

“The lack of significant progress on inflation returning to target in the US—which has an implicit target of 2.0% y/y—was a dominant theme in the minutes, and has halted the rand’s recent progress towards R18.00/USD,” Bishop said.

“In particular, markets read the minutes as underlying a delay in the start of the rate cut cycle.”

Despite this, it is unlikely that the currency will reverse in a way that will impact fuel pricing this late in the month.

The overall stronger currency is contributing to an over-recovery in fuel prices of around 30 cents per litre.

On the oil front, prices dropped to the lowest point since February before stabilising ahead of OPEC+ meetings on Sunday.

According to Bloomberg analysis, Brent futures held above $82 a barrel after dropping 2.2% last week.

“Brent is up about 7% this year, supported by persistent geopolitical risks and OPEC+’s 2 million barrels a day of output cuts. Still, futures have fallen since mid-April as nervousness that the conflict in the Middle East would spread and disrupt oil flows have eased,” Bloomberg said.

The more stable oil price is currently contributing to an over-recovery in fuel prices of between 60 and 69 cents per litre.

A petrol price cut of around R1.00 will bring substantial relief to South African motorists who have had to suffer a total of R3.00 in cumulative hikes since the start of the year.

Prices can still change before the final announcement and changes are made next week Wednesday (5 June). The Department of Mineral Resources and Energy is expected to announce the final adjustments sometime before then.

Read: Petrol price shock for South African motorists

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