Big petrol price cut coming in April

Fuel price recovery data for the end of week three in March shows that the large over-recovery that has been building for most of the month is getting bigger.

This means that sizeable petrol price but for both petrol and diesel are likely next month, with little over a week left in the month for any changes.

According to the latest data from the Central Energy Fund (CEF), petrol prices are sitting with a comfortable over-recovery of between 77 and 91 cents per litre.

Diesel, meanwhile, is sitting at around 95 cents per litre.

Even with the 3 cents per litre increase to the carbon fuel tax levy expected from 1 April, fuel prices are set to come down.

Both a stronger rand and much lower oil prices are to thank for this trend, with the latter doing the bulk of the heavy lifting.

Oil prices are trading around $71 a barrel, which is far lower than the $75+ levels seen a month ago.

The lower price has been driven by pressures on the demand side and boosts on the supply side as various geopolitical tensions play out.

Prime among these is the market uncertainty caused by US President Donald Trump’s trade and tariff war, which has caused growth expectations in key markets to be pulled back.

Prices have found some support from the United States itself, with crude edging a bit higher on Thursday after the US Fed held on interest rates and local consumption ticked higher.

However, prices remain markedly below the mid-January peak as a confluence of bearish factors keep up the pressure.

“While the escalating trade war threatens to hit energy demand as tariffs and counter-levies are imposed, OPEC and its allies are set to raise output from April, contributing to weaker global balances,” Bloomberg analysts said.

Fading hopes for a ceasefire in the Middle East and the lack of progress in Russia-Ukraine peace talks are elevating geopolitical risks, adding to supply concerns.

The rand tells a better story

The other side of the equation for local fuel pricing—the rand/dollar exchange rate—has seen a shift throughout the month.

While it started out contributing to a small under-recovery, the exchange rate is now solidly on the positive side, driving a 10 cents per litre over-recovery in prices.

On Thursday, the rand was trading at around R18.15 to the dollar, a surprisingly stable position it has held for the past two weeks or so.

According to economists at the Bureau for Economic Research (BER), the strength isn’t necessarily reflective of any positives in the South African market, but rather the effect of global markets.

As with the oil price, forex markets are also feeding off the uncertainty raised by the Trump presidency.

Specifically, a “weak dollar” story has played out as global investors adjust their expectations around US monetary policy and the US economy, which is highly uncertain.

South Africa has historically benefitted from certain types of global crises—especially those that drive up commodity prices—and the uncertainty caused by Trump’s trade wars has pushed many into the ‘safe haven’ of gold, boosting the rand.

In terms of monetary policy, the US Fed elected to hold US interest rates on Wednesday as all targets are “on track”, which saw risk aversion and the US dollar subsiding.

This again boosted the rand.

According to Investec chief economist Annabel Bishop, financial markets now anticipate more interest rate cuts in the US in 2025 and 2026 than were expected early this year.

With the South African Reserve Bank (SARB) expected to follow suit and also hold out further cuts until later in the year—if at all—this should keep the rand in a stronger position overall.