Petrol price warning for January

Motorists tracking the daily recoveries in fuel prices should brace for a volatile ride into January 2025, with petrol and diesel prices fluctuating between potential increases and decreases as the rand and global oil prices shift.

After starting the month in negative territory—showing an under-recovery, thus a potential price hike for January—these have turned somewhat thanks to a stronger rand/dollar exchange rate and oil being range-bound.

The latest data from the Central Energy Fund shows that Petrol 95 has a small over-recovery of 2 cents per litre, while Petrol 93 is still sitting with an under-recovery of 5 cents per litre.

Similarly, diesel 0.05% is pointing to a tiny 1 cent per litre cut, and diesel 0.005% is showing a potential 2 cent per litre hike.

The recoveries are on the edge both ways, meaning any fluctuations in the exchange rate or global oil prices in the next two weeks or so could push prices either way.

These are the current projections:

• Petrol 93: increase of 5 cents per litre
• Petrol 95: decrease of 2 cents per litre
• Diesel 0.05% (wholesale): decrease of 1 cent per litre
• Diesel 0.005% (wholesale): increase of 2 cents per litre
• Illuminating paraffin: decrease of 11 cents per litre

The more positive news in the data is that the trend is pointing towards a cut, and that diesel prices especially have shown a much bigger reduction in the under-recovery from the beginning of the month.

This is largely thanks to the rand strengthening against the US dollar, pushing back below R18.00/$ and heading toward the R17.60/$ levels seen before it crashed out along with other emerging market currencies after the 2024 US elections.

The stronger rand was driven by better-than-expected inflation data on Wednesday, as well as a weaker dollar due to higher US Treasury yields, according to Citadel Global director Bianca Botes.

Markets are also waiting for a likely 25 basis point cut by the US Fed later this month—a move supported by US inflation data.

In South Africa, consumer inflation came in at 2.9% in November, up only 0.1 percentage points from October, beating market expectations of a higher climb to 3.1%.

Looking ahead, economists expect inflation to continue to edge higher over the coming months, but likely remain below the South African Reserve Bank’s 4.5% target mid-point.

A 25bp rate cut in the US, meanwhile, will extend the US/SA interest rate differential, which should support a stronger rand.

Looking at the oil markets, the price of Brent crude has been rising in recent sessions, but appears to have settled around $73-$74 a barrel.

According to Bloomberg analysis of the market, oil has been trading in a narrow range between $70 and $75 a barrel in recent months. However this is down significantly from the $90+ highest seen earlier in the year.

Prices are expected to remain on the weaker side, with analysts expecting a glut next year due to lower demand and burgeoning supplies.

Botes noted that oil is also holding steady after recent gains amid potential new US sanctions on Russia and Iran.

Analysts said that the direction of oil will hinge on China’s economic prospects, with a potential economic stimulus plan boosting demand and thus raising prices. However, if this does not materialise, price pressure could remain.

In the near-term, however, a few more data releases are expected which could impact pricing, though it is unlikely to move outside its current range.

Read: R12 per litre alternative to high petrol price gaining ground in South Africa