Bad turn for petrol prices in December
With the rand under renewed pressure and global oil prices taking a negative turn, petrol and diesel prices for December are heading in the wrong direction.
This is according to the latest data from the Central Energy Fund (CEF) for the third week of November.
While petrol prices are still showing an over-recovery (thus projected cut), the amount is negligible and trending backwards.
Petrol prices are showing a potential cut of 1 to 13 cents per litre for 95 ULP and 93 LRP, respectively, while diesel is nowhere close to an over-recovery, showing potential hikes of around 43 cents per litre.
The recoveries for both fuel types have deteriorated since the mid-month estimates.
These are the expected changes:
- Petrol 93: decrease of 13 cents per litre
- Petrol 95: decrease of 1 cent per litre
- Diesel 0.05% (wholesale): increase of 44 cents per litre
- Diesel 0.005% (wholesale): increase of 43 cents per litre
- Illuminating paraffin: increase of 41 cents per litre
The rand has been under continued pressure in November, breaking through the R18.00 to the dollar level earlier in the month as global markets digested a Donald Trump win for the US presidency.
Trump’s victory is seen as a negative for emerging markets, with his America-first policies breeding uncertainty around trade and immigration, and resultant inflation risks.
His win strengthened the dollar, which sunk currencies like that rand. Prior to the election outcome, the rand was trading well under R17.50 to the dollar and even flirted with a move below R17.00/$ as sentiment around the country turned.
However, economists now see volatility persisting in the local unit moving forward.
The rand did get to enjoy some positive sentiment, however, with S&P Global taking a positive outlook on South Africa’s credit rating last week.
This pushed the rand back towards R18.00/$ and away from highs close to R18.70/$ seen after the US election.
Investec chief economist Annabel Bishop said that US and local interest rate cuts will also factor into the rand’s performance. The South African Reserve Bank (SARB) will announce its next policy move later on Thursday (21 November), with a 25 basis point cut widely expected.
Oil pressure
The other side of the fuel price equation is the global oil price, which has increased to around $73 a barrel after starting the month closer to $70.
According to Terence Hove, a financial markets strategist consultant to Exness, oil prices are rebounding and recovering from recent lows, particularly as markets look at increasing geopolitical concerns and increased demand.
“The ongoing escalation of the Ukraine conflict could affect the market as traders assess the possible developments. The potential disruption of Russian oil exports could fuel some supply concerns,” he said.
On the demand side, US crude oil inventories increased by 4.75 million barrels in mid-November, beating expectations.
Hove noted that concerns about lower demand could weigh on the market – however, a recovery in Chinese oil demand, with crude imports expected to reach near-record levels by November’s end could contribute to a more bullish sentiment.
“Chinese demand could strongly affect the market directly,” he said.
Meanwhile, Iraq’s fuel oil exports are set to reach record levels in 2024, driven by increased shipments and reduced domestic demand. This surge could contribute in dampening the market’s prospects as the rise in oil exports could ease prices.
According to Bloomberg analysis, oil has swung between gains and losses since mid-October, buffeted by a range of factors including concerns over Chinese demand and a stronger dollar.
“The market is facing a supply glut next year and investors are watching for a decision from OPEC+ on plans to start reviving idled supply,” it said.
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