Another massive petrol price cut on the cards for October

Early data from the Central Energy Fund is pointing to a fifth consecutive cut in petrol and diesel prices for October.

Data for the end of the first week in September shows a significant over-recovery in prices, exceeding R1 per litre for both petrol and diesel.

Petrol is showing an over-recovery of between R1.31 and R1.39 per litre, while diesel’s over-recovery is between R1.12 and R1.125 per litre.

These are the early indicators:

• Petrol 93: over-recovery of 131 cents per litre
• Petrol 95: over-recovery of 139 cents per litre
• Diesel 0.05% (wholesale): over-recovery of 112 cents per litre
• Diesel 0.005% (wholesale): over-recovery of 125 cents per litre
• Illuminating paraffin: over-recovery of 118 cents per litre

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

The over-recoveries are being driven by both the global oil price and the stronger rand relative to the start of September.

If these conditions persist until the end of the month, then South African motorists could see the net decrease to petrol prices in 2024 jump to about R1.60 per litre – a significant shift from the first five months of the year where there was a net R3.00 hike.

The rand traded weaker at the start of last month due to a market panic over data from US that sparked fears of a recession in the world’s biggest economy.

While these fears later abated, and markets eased and returned to normal, the week-long flurry raised the average price of the rand versus the dollar.

Starting September, however, the rand continued its stronger streak, remaining under R18 to the dollar, currently trading at around R17.70.

According to Investec chief economist Annabel Bishop, while the rand is stronger on average, the local unit remains volatile, particularly as markets await the next move by the US Fed on interest rates, as well as where the local South African Reserve Bank (SARB) will go this month.

“While the rand has seen some volatility, it is mild compared to historically. The domestic currency has seen a substantial loss of political risk, which aided its appreciation towards R17.60/USD, from R20.00/USD earlier this year,” Bishop noted.

“We expect the rand to continue to strengthen, averaging R17.70/USD in Q4.24, from an average of R18.00/USD in Q3.24, while 2025 sees the domestic currency continue to track stronger, towards R17.00/USD.”

She said the rand is expected to move towards R16.00/USD in 2026 as South Africa experiences faster growth and global risk-taking improves.

On the oil front, the commodity is on its way to posting the deepest weekly loss in almost a year on persistent concerns about soft demand and ample supply – even as oil-producing nations (OPEC+) delayed a planned increase in output by two months.

According to Bloomberg analysis, OPEC+ had earlier given indications that it was keen on pressing ahead with its planned supply increases from October but reversed course amid a sharp decline in global benchmark prices.

Oil prices initially rose when the alliance released its statement on Thursday but ended the session flat.

“Crude has trended lower since early July due to demand concerns from key consumers, particularly China, and signs of rising supply from outside of OPEC, although recent disruptions to supplies from Libya have provided some support,” the group said.

On the demand side, there are also problems.

Chinese and Indian diesel markets — which account for the bulk of Asian demand — are showing signs of a slowdown, with refining margins declining. TThat’sechoing trends in Europe, where futures hit the lowest since mid-2023 last week.

Oil prices have dropped significantly, now trading under $73 a barrel.

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