R1.50 petrol price joy for South Africa

 ·10 Jun 2024

South African motorists are currently in store for a R1.50 cut in petrol prices in July, with data from the first week of June pointing to a big over-recovery in the market.

The latest data from Central Energy Fund (CEF) shows that petrol prices are sitting with an over-recovery of between R1.47 and R1.52 per litre, while diesel is also lining up for a significant cut of between 92 cents and R1.02 per litre.

This over-recovery in prices is present despite the weakening of the rand following the 2024 national elections at the end of May, and indicates that things could actually improve should markets turn in South Africa’s favour.

Markets are currently jittery as the ANC failed to secure an easy path to a majority, thus certainty in the way forward for the government.

Instead, the former majority party now has to navigate various negotiations with opposition parties, big and small, to form a Government of National Unity—which may prove to be an insurmountable task.

At the weekend, the fourth biggest party in the country, the EFF, said it would not enter into any GNU with the DA and other centrist parties involved. The EFF leaving the negotiation table boosted the rand, as the party is seen as anti-business, disruptive and generally negative for stability.

The rand has started the week flat, trading at around R18.90 to the dollar. It has been teetering close to the psychological barrier of R19.00/$ since the outcome of the election. Before the election, it was pushing towards breaking under R18.00/$.

Any move back towards R18.00 would push fuel recoveries even higher, meaning an even bigger cut at the pumps.

The real star of the show for fuel recoveries at the moment is the global oil price, which has pulled under $80 a barrel.

According to Bloomberg analysis oil steadied after a weekly drop with the market still digesting oil-producing nations’ (OPEC+) decision to restore supply, as traders look ahead to a set of industry reports and a Federal Reserve decision on interest rates.

Brent traded below $80 a barrel after losing 2.5% last week as algorithmic trading amplified declines following the alliance’s announcement it would start returning more supply from the third quarter.

OPEC+ has been keeping oil prices artificially high for the past year, by cutting supply by over 1 million barrels a day.

“After OPEC+’s announcement of a rollback in output cuts caused prices to slump, officials emphasized that the supply increase had always been provisional and could be paused,” Bloomberg said.

However, market risks persist, with geopolitics still taking centre stage, and the outcomes of various elections being held in 2024 under the watchful eye of traders.

Read: Warning over delivery crisis in South Africa

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