Here is the expected petrol price for July

The blow to oil markets this past week is bringing bad news for South African motorists in July, with mid-month data pointing to under-recoveries for petrol and diesel prices.

Mid-month data from the Central Energy Fund (CEF) shows that sharp surge in global oil prices due to escalations of war in the Middle East has pushed local fuel price recoveries into negative territory.

Fortunately, the remarkably resilient rand is undercutting this slightly, with an over-recovery softening the blow.

Petrol prices are now showing an under-recovery (thus projected hike) of between 6 and 9 cents per litre, while diesel is showing an under-recovery of between 10 and 12 cents per litre.

These are the projections at mid-month:

• Petrol 93: increase of 6 cents per litre
• Petrol 95:  increase of 9 cents per litre
• Diesel 0.05% (wholesale):  increase of 10 cents per litre
• Diesel 0.005% (wholesale):  increase of 12 cents per litre
• Illuminating paraffin:  increase of 1 cent per litre

The CEF does not present daily snapshot data for LP Gas, so it is not currently possible to give the expected price for June.

The daily snapshots from the CEF are not entirely predictive of the final fuel price adjustments, and the numbers may change by the end of the month.

The Department of Petroleum and Mineral Resources only announces the final price a few days before the implementation date.

However, the data does give a strong indication of where prices are headed, despite the uncertainty that is currently lingering in markets.

The end result for July will hinge on what happens next in the Israel-Iran conflict. If the war escalates, drivers can expect the higher oil prices to cement a hike for July.

If the de-escalation occurs, markets could swing in the opposite direction again, possibly even delivering a small cut in prices.

Oil price surge

The main driver behind the sudden swing in fuel price recoveries is the surge in oil prices over the past week as Israel launched an attack on Iran.

Oil was previously trading around $68 a barrel as the United States’s tariff war put pressure on demand projections, while OPEC nations increased output, putting a supply glut on the map.

However, with Israel’s attack on Iran, brent crude spiked above $90 per barrel before pulling back to around $75 a barrel as markets parsed the situation.

According to Bloomberg’s analysis of the markets, prices are still far higher than before the attacks, and markets are watching closely for any sign of supply disruptions.

“It’s a jittery market but still not pricing in the worst-case scenarios on supply disruption,” analysts said.

“There could well be bigger strikes ahead, but that is still not changing the market’s calculus on supply risk.”

Further escalations could see oil prices surging once again, but for now, the market remains in flux.

Rand holds steady

Despite the heightened global tensions and exodus into safer assets, the rand has remained remarkably resilient against the US dollar, pulling back from over R18.00/$ to around R17.80.

However, while the rand/dollar exchange rate is contributing to an over-recovery, it is not enough to counter the sharp rise in oil.

According to Citadel Global, the geopolitical tensions that flared over the weekend triggered sharp risk-off sentiment as US and European markets worried about war escalating further.

While, locally, the rand recovered some ground after Friday’s risk-off move, the group warned to expect heightened volatility as markets react to fast-moving developments in the Middle East.

The rand has been enjoying renewed strength versus the dollar in recent sessions; however, this was driven more by dollar weakness than any inherent rand strength.

Economists anticipate the rand strengthening further against the dollar over the medum- to long-term, but immediate global tensions keep markets volatile.

This is how the prices could reflect at the pumps: