Bad news for petrol prices in October
Petrol price recoveries are still building for a hike at the pumps in October, but the rand is getting stronger and oil is getting cheaper, which could tip the scales in motorists’ favour by month’s end.
Data from the Central Energy Fund for the end of the second week in September show fuel price recoveries still in the red for petrol.
According to the CEF, petrol prices are building for a 13 to 21 cents per litre hike at this stage, with diesel looking to come down by 9 cents per litre.
While diesel price recoveries are more positive, they have reduced from 22 cents per litre start at the end of the first week of the month.
Petrol price recoveries, meanwhile, have improved by about 8 cents per litre since the start of the month.
These are the projected levels at the end of the second week of September:
- Petrol 93: increase of 11 cents per litre
- Petrol 95: increase of 19 cents per litre
- Diesel 0.05% (wholesale): decrease of 9 cents per litre
- Diesel 0.005% (wholesale): decrease of 9 cents per litre
- Illuminating paraffin: decrease of 12 cents per litre
The main contributor to the under-recovery for petrol and over-recovery for diesel is the global oil price.
This factors into the cost of international product prices used to refine petrol—which are slightly higher—feeding into the under-recovery in the basic fuel price.
Oil has been fluctuating in a small range of between $62 and $67 a barrel since the start of August, with Brent Crude flat at around $66 a barrel.
The commodity has been generally weaker in 2025 amid dampening demand due to global tariffs, while supplies have been swelling thanks to OPEC+ increasing output to the market.
According to Bloomberg, while geopolitical disruptions could affect the supply side, this has mostly been countered by a worsening market outlook.
The International Energy Agency (IEA) said it now sees an even larger record oil surplus in 2026 as OPEC+ continues to revive production and supply from rivals grows.
Meanwhile, US economic data showed a surge in jobless claims, adding to concerns that the labour market in the world’s largest economy is weakening.
Oil traders are broadly grappling with the balance between geopolitical risks and rising supplies, which has kept prices trapped.
“On the one hand, we have this surplus emerging in the market,” Toril Bosoni, head of the oil markets division at the IEA, said in a Bloomberg TV interview. “But we’re also seeing the risk to supply.”
While the contribution of oil to local fuel prices is mixed for petrol and diesel, there is a positive outlook.
Analysts at Citigroup said that the market is caught in a “tug-of-war between increasingly bearish fundamentals and heightened geopolitical risks.”
However, the bank reaffirmed its forecasts for Brent to drop into the low $60s by year-end and into 2026, which should contribute to lower local pricing.
The rand is also turning
Counter to previous months, the rand/dollar exchange rate is contributing to an over-recovery in pricing across the board, adding 6 or 7 cents per litre.
The rand has surprised the market through its resilience to several shocks over the past months, the main one being the imposition of a 30% trade tariff on South African exports to the United States.
This resilience has been aided by a weakening of the US dollar, where key indicators point to an economy under pressure.
After testing the R17.50/$ resistance level this week, the rand finally broke through after US consumer inflation data came in hot, and first-time applications for unemployment aid rose.
According to analysts, this has kept the Federal Reserve on track to cut interest rates next Wednesday.
Like other risk-sensitive currencies, the rand often takes cues from global drivers such as US policy and economic data.
Looming rate cuts in the US boosted the rand, pushing it to trade under R17.40/$.
The cuts also signal a possible rate cut coming from the South African Reserve Bank, as well, although this is less certain.
Some local economists believe that the SARB will move to cut rates at least once more this year, with a 25 basis point cut coming in either September or in the final November meeting.
However, others, like Absa’s experts, do not see any meaningful shift in policy rates until 2027.
Regardless, the shifting market dynamics have been a boon to the rand, which is trading at much stronger levels than many had expected.
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