Bad to worse for petrol prices in South Africa

 ·17 Jan 2025

Data from the Central Energy Fund (CEF) for the end of the second full week of the new year shows that fuel price recoveries are continued to trend in the wrong direction, meaning petrol and diesel price pain for motorists in February.

A weaker rand and higher oil prices relative to December are delivering a double blow to recoveries and pushing prices higher—even more so than at the mid-month estimate earlier this week.

Petrol prices are now showing an under-recovery of around 90 cents per litre, while diesel prices are over R1.00 – between 11 and 16 cents per litre worse than at the start of the week.

  • Petrol 93: increase of 93 cents per litre (+12 cpl)
  • Petrol 95: increase of 86 cents per litre (+11 cpl)
  • Diesel 0.05% (wholesale): increase of 106 cents per litre (+16 cpl)
  • Diesel 0.005% (wholesale): increase of 104 cents per litre (+16 cpl)
  • Illuminating paraffin: increase of 92 cents per litre (+19 cpl)

The biggest culprit behind the weakening trend is the global oil price, which has risen to over $81 a barrel in January.

Brent crude oil price breached $80 a barrel for the first time since October, pushing a bigger under-recovery in local pricing.

According to Bloomberg’s analysis of the market, oil is headed for a fourth straight weekly gain ahead of President-elect Donald Trump’s second term, with traders seeking clarity on far-reaching sanctions and trade policies.

“Trump’s advisers are crafting a wide-ranging sanctions strategy to try to facilitate a Russia-Ukraine diplomatic accord while also squeezing Iran and Venezuela, according to people familiar with the matter. Fresh trade tariffs may also disrupt global energy flows,” Bloomberg said.

Crude has rallied strongly since the year began, as cold weather in the Northern Hemisphere winter pushes up heating demand, US crude stockpiles fell to seasonal lows, and the sanctions threaten to throttle supply.

George Pavel, General Manager at Naga Middle East, noted this week that crude oil futures are finding support due to supply concerns, but may come under pressure.

US sanctions on Russian oil producers and tankers have added to the uncertainty and could tighten the supply landscape, he said. However, news of a ceasefire in the Middle East has reduced the geopolitical risk premium, tempering price momentum.

“On the demand side, global oil consumption continues to rise, driven by strong travel activity in India and China. Nevertheless, demand has slightly underperformed expectations, contributing to market caution.

“Further demand growth is anticipated, particularly as key events like the Lunar New Year drive seasonal consumption,” he said.

Trump, who will be sworn in on Monday, 20 January, has already caused some turmoil in global markets with the added uncertainty his presidency will bring.

This has also affected emerging market currencies like the rand—which is already much weaker against the dollar this year so far—and interest rate projections for the year.

The Bureau for Economic Research noted on Friday that the combination of a weaker rand and a higher oil price does not bode well for South Africa’s inflation and interest rate trajectory.

“As things stand today, the fuel price is set to increase for a fourth consecutive month in February. Indeed, as financial markets have started to price fewer rate cuts by the US Fed, traders have now adjusted their expectations to just one 25bps cut by the SA Reserve Bank,” it said.

Despite this, the BER believes that multiple rate cuts could still happen, given South Africa’s lower-than-expected inflation, while Investec’s modelling also points to around 75bp worth of cuts before the end of the year.


Read: Massive R2,000 electricity bill shock for South Africans

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