Another big petrol price cut coming for South Africa
Early data from the Central Energy Fund (CEF) shows that fuel price recoveries are building for a significant cut at the pumps in February—if current market conditions persist.
Data for the end of the first week of January points to large recoveries for both petrol and diesel, helped by the stronger rand and pressure on global oil prices.
Petrol prices are showing an over-recovery of around R1.20 per litre, while diesel has an even larger recovery of around R1.75 per litre.
Here are the recoveries at the start of January:
- Petrol 93: decrease of R1.09 per litre
- Petrol 95: decrease of R1.15 per litre
- Diesel 0.05% (wholesale): decrease of R1.49 per litre
- Diesel 0.005% (wholesale): decrease of R1.63 per litre
- Illuminating paraffin: decrease of R1.28 per litre
Indicators at the start of the month are far too early to make any decisive call on what the fuel price changes in February will be.
However, they do give a solid indication of what would need to happen in the coming weeks to impact the result.
For instance, with such a large over-recovery, oil prices would have to rise, or the rand would have to weaken significantly to reverse the trend and move to an under-recovery (i.e., price increases).
Fortunately for motorists, there is no indication that this will happen, with both oil trades and the rand-dollar exchange expected to remain in beneficial territory for motorists.
If current market conditions persist, this will deliver a major boon to motorists to kick off 2026, with January fuel prices already starting with a cut.
From Wednesday, 7 January, petrol prices were cut by between 62 and 66 cents per litre, while diesel prices were cut by between R1.37 and R1.50 per litre.
However, the data comes with the caveat that there are still three weeks until an official announcement, and history has shown that things can change very quickly in that time.
Rand and oil wins for South Africa
The over-recovery currently building is largely due to the movement in international product prices, driven by global oil prices, adding close to R1 to the numbers.
Oil prices have come under renewed pressure due to the United States’ attack on Venezuela in which it captured the country’s president, Nicolás Maduro.
While operating under the pretence of taking on the drug trade, oil has emerged as the key reason for the United States’ action, with the White House moving to secure favourable oil stocks.
With an influx of Venezuelan oil, prices came under pressure heading below $58 a barrel early in the month.
However, this was upended by US threats on Iran and pressure on Russia, applying pressure to supply-side pricing, resulting in an elevated oil price of over $62 a barrel.
Still, this is unlikely to make a significant dent in oversupply forecasts, as the market anticipates a glut in 2026. Some analysts predict a continued fall in prices, potentially hitting $50 a barrel.
“Crude remains caught in a complex dance between heightened geopolitical risk and rising inventory,” said Robert Rennie, the head of commodity research at Westpac Banking Corp.
Higher Venezuela flows, and rising output elsewhere, could see prices trading in the $50s through the first quarter, he added.
The other side of the local fuel price equation—the rand/dollar exchange rate—is also favouring motorists, currently contributing around 21 cents per litre to the over-recovery.
The rand has been on a winning streak in the latter months of 2025 and at the start of 2026, delivering its biggest gains in over a decade.
The rand ended 2025 nearly 13% stronger against the US dollar, marking its biggest annual gain in 16 years as the greenback weakened broadly.
While much of the rand’s strength is due to the dollar’s weakness, markets have been drawn to emerging economies and have turned sweet on South Africa in particular.
South Africa’s fundamentals remain weak, with low growth, high unemployment and many policy bottlenecks hampering reform.
However, it remains a resilient market and is on an upward trajectory, despite its issues.
South Africa’s risk-sensitive currency is also likely to benefit from its exposure to precious metal prices and comparatively lower near-term political risk compared to its peers facing elections in 2026.
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