Good news for petrol prices in South Africa next week
Month-end data from the Central Energy Fund (CEF) shows that motorists in South Africa should enjoy a small cut to petrol prices next week, with diesel drivers getting even more relief.
The data shows an over-recovery for both petrol and diesel at the end of the month, cementing a cut at the pumps on Wednesday, 3 September.
Both the rand and oil prices have continued to contribute to the over-recovery, which was recorded at 4 to 12 cents per litre for petrol and 55 cents per litre for diesel.
These are the projections at month-end:
- Petrol 93: decrease of 12 cents per litre
- Petrol 95: decrease of 4 cents per litre
- Diesel 0.05% (wholesale): decrease of 55 cents per litre
- Diesel 0.005% (wholesale): decrease of 55 cents per litre
- Illuminating paraffin: decrease of 37 cents per litre
While the cut for petrol prices is relatively small, it does point to a reversal of the flatter start to recoveries at the start of the month.
Notably, the rand moved throughout the month from contributing to an under-recovery to contributing to an over-recovery as it strengthened against the US dollar.
In the final week of the month, the rand traded mostly sideways, holding in the R17.60 to R17.70/$ range. The local unit has been trading at the whims of global markets, or more specifically, against dollar strength/weakness.
This week, the rand slipped as a firmer dollar and US Fed policy concerns weighed on sentiment.
Local factors, including hotter consumer inflation and higher producer inflation, had little impact. The local news cycle has also had little to no impact on the rand’s movements.
Despite this, the rand has been quite resilient to ordinarily shocking economic events, such as the implementation of a 30% tariff on South African exports to the United States.
This muted response led to the rand contributing 2 cents per litre to the fuel price over-recovery.
Regardless, despite its resilience, the rand remains severely undervalued, with South Africa’s risk premium due to weak growth, poor economic policies and perennial infrastructure, power and logistics crises adding about R4.00/$ to the exchange.
Oil prices help diesel
Oil prices have also been relatively flat, though tilted towards lower prices. This has been the main contributor to fuel price recoveries.
The impact for petrol prices has, again, been limited. However, with the diesel crunch hitting local pricing last month, the August recovery has been more pronounced for this fuel type.
According to Bloomberg’s analysis of the market, oil prices have been edging lower and are on course for a monthly loss.
Trading conditions have been dominated by concerns about a looming glut and geopolitical issues, including US-led efforts to end the war in Ukraine.
Oil traded below $68 a barrel, with the global benchmark about 5% lower this month.
Oil’s decline in August is the first monthly drop since April, when most commodities were hurt by a sharp escalation in Trump’s trade war and concerns that energy consumption would suffer.
The worries about a surplus — with the International Energy Agency forecasting a record glut — follow a campaign by OPEC+ to restore idled capacity.
Diesel prices took a knock in previous months as supplies came under pressure and demand rose ahead of high-consumption seaons. This led to a deviation between petrol and diesel price recoveries.
While global diesel supplies are still low amid higher seasonal demand, this is priced into oil trades at around $68 a barrel. Oil prices would likely be trading lower without the supply pressures.
Nevertheless, this has rebalanced diesel recoveries in local pricing, with diesel benefitting to the tune of 53-54 cents per litre.
The Department of Petroleum and Mineral Resources will publish the official fuel price changes for September sometime before they come into effect on Wednesday, 3 September.
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