Bad turn for petrol prices in South Africa

 ·14 Oct 2024

Fuel price recoveries have done a complete 180, bringing some bad news for motorists in South Africa.

According to the latest data from the Central Energy Fund (CEF), petrol and diesel prices have swung from an over-recovery (price cut) to an under-recovery (price hike) in a matter of days.

Petrol 95 is currently showing an under-recovery of 6 cents per litre, while diesel (0.05% and 0.005%) is showing an under-recovery of around 7 cents per litre.

The only exception is petrol 93, which is still showing an over-recovery of 4 cents per litre – though this could trend lower if current market conditions persist.

This marks a complete reversal from the start of the month, where prices were showing a strong over-recovery of around R1 per litre.

The reversal comes as global oil prices remain high – especially relative to the lows of September 2024 – and the rand has remained weaker and volatile.

Oil prices have been driven higher by the escalating conflict in the Middle East, with traders left on edge at the end of last week, awaiting retaliation from Israel after Iran’s 1 October ballistic attack.

While this risk is being priced into the market, it has also opened the door for other market pressures to come in – particularly China’s economic data.

At the market opening this week (14 October) oil prices dropped by more than 1.5%, which would have a positive impact on fuel pricing, provided it continues through to the end of the month.

According to XS senior market analyst Antonio Ernesto Di Giacomo, the weaker price is due to concerns over disappointing inflation data from China and the lack of clarity in its economic stimulus plans.

“China, the world’s largest oil importer, is a critical player in the global energy market, and any changes in its economy significantly impact crude demand. The recent deflation in the Asian country has caused unease in international markets, suggesting a weakening economic growth and a potential decline in oil import needs,” he said.

Despite geopolitical tensions in the Middle East – particularly concerns about a possible escalation of the conflict between Israel and Iran – economic data from China has dominated the market, he said.

“The conflict in this key oil-producing region could affect global supply if hostilities intensify. However, uncertainty over China’s economic future has had a greater influence on investor decisions, with more focus on signs of economic weakness from the world’s largest oil consumer.”

Di Giacomo said that this has led to a fall in oil prices and that the evolution of China’s economy will be a crucial factor to watch, as “any significant change in its economic policy could soon influence demand and crude prices”.

The rand

The other component of local fuel pricing, the rand, has also not been in motorists’ favour so far this month.

After pushing toward R17.00 to the dollar and flirting with a break below this crucial resistance level, the local unit moved in the opposite direction and traded much weaker last week.

The rand weakened to around R17.60/$, pressured by the stronger greenback and ongoing uncertainty surrounding China’s economic outlook. The rand’s performance was also influenced by the anticipation of further SARB rate cuts.

While the rand closed stronger at the end of the week, it has not been able to find direction.

According to Citadel Global director Bianca Botes, this has caused it to stall around R17.45/$ in the face of a much stronger dollar.

Investec chief economist Annabel Bishop said that volatility is set to be the norm for the rand, as it remains influenced by US data releases and commentary from monetary policy officials.

With uncertainty once again in the driving seat of global markets and geopolitical tensions, motorists can expect fuel price recoveries to remain volatile.


Read: Warning about big change in South Africa’s petrol price

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