Here is the expected petrol price for July

Mid-month data from the Central Energy Fund (CEF) shows that South African motorists are in store for another big cut to fuel prices next month, with global oil prices working in our favour.

The data from the CEF shows that petrol prices are slated for a cut of around R1.15 per litre, while diesel prices should fall by around 55 cents per litre.

While this is a smaller cut than the R1.50 per litre showing at the start of the month, it is still a significant over-recovery in prices.

These are the expected changes:

• Petrol 93: decrease of R1.18 per litre
• Petrol 95: decrease of R1.12 per litre
• Diesel 0.05% (wholesale): decrease of 55 cents per litre
• Diesel 0.005% (wholesale): decrease of 49 cents per litre
• Illuminating paraffin: decrease of 45 cents per litre

The CEF does not present daily snapshot data for LP Gas.

The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes.

The department determines these adjustments, considering various factors, at the end of the month.

Domestic fuel costs are primarily governed by the rand/dollar exchange rate and international oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.

For July, it is only the global oil price that is working in local motorists’ favour, with the volatile rand currently contributing to an under-recovery.

The rand

The rand has had a very shaky start to the month as markets digest the results of the 2024 national election.

Ahead of the national vote at the end of May, markets were banking on a stronger showing by the ANC, hoping for either an outright majority or enough of a percentage for the governing party to easily form a stable government with smaller parties.

However, the outcome was a shock result for the ANC, where it only secured around 40% of the vote, forcing it to turn to opposition parties like the DA, EFF or upstart MK to form a majority government.

None of the options are what markets would deem “stable”, given the disparate ideologies of the main opposition parties, as well as the potential for chaos and disruptions from the more left-leaning EFF and MK.

In recent days, markets have been more optimistic with the formation of a Government of National Unity (GNU) likely to be sworn in on Friday (14 June) with cooperation from more business-friendly parties (DA, IFP and others).

However, the GNU will be tested in the coming days, weeks, months, and years—and nothing is certain. Hence, markets will likely remain shaky until confidence in the stability of such a government is proven or restored.

On Friday, the rand was trading at R18.45 to the dollar – stronger than the R18.80+ levels seen after the election but still weaker than the R18.10 levels seen just before the vote.

The weaker rand, relative to the end of May, is contributing to an under-recovery in prices of around 16 cents per litre.

Oil prices

Global oil prices are telling a much better story, with prices recovering to below $85 a barrel, currently sitting at $82.

According to Bloomberg analysis, oil prices dropped in June thanks to a risk-off tone in wider financial markets and more signs of robust global supply.

However, risks still abound, particularly with geopolitical issues still very much present in global markets.

“Oil has declined since early April, in part due to concerns over demand, although attacks on ships by the Yemen-based Houthi militants have started to ramp up again, jeopardizing trade flows,” the group said.

On Thursday, a cargo vessel was on fire after being hit by two projectiles while sailing in the Gulf of Aden, the UK Navy said, marking the second significant assault in the area in as many days.

“More supply from the US, as well as an ongoing slowdown in Chinese refining activity, are further clouding the outlook.”

Despite the risks, traders still appear to be bullish. The International Energy Agency has flagged a major surplus this decade as the shift away from fossil fuels accelerates.

Oil-producing nations (OPEC+) have not been keen on this. The grouping has in the past moved to artificially inflate prices when risks of big drops have become apparent.

Russia announced this week it would be cutting production by an additional 400,000 barrels on top of the 500,000 it has already committed to cutting.

However, the lower oil price is contributing to a significant overrecovery in local fuel prices, which range from 65 cents a litre for diesel to R1.34 a litre for petrol.

This is how the mid-month prices could reflect at the pumps (diesel prices are wholesale and will differ at retail):

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