Here is the expected petrol price for June

Mid-month data from the Central Energy Fund points to a petrol price increase in South Africa for June, while diesel drivers could see another cut.

CEF data shows that petrol is on track for a price hike of between 42 and 49 cents per litre from 3 June, while diesel could decline by between 54 and 56 cents per litre.

The projected price changes would follow two consecutive months of major price cuts, where prices for petrol and diesel dropped by as much as R3.60 and R2.90, respectively, in April and May.

The steep cuts to fuel prices were as a result of tanking global oil prices as the coronavirus pandemic led to a massive oversupply in oil when industries shut down for various lockdowns around the world.

Local prices could have dropped further, had it not been for weakness in the rand/dollar exchange rate, which pushed R19.00/$ levels after South Africa’s own lockdown strategy exacerbated other economic issues, including Moody’s credit rating downgrade.

In May, so far, circumstances in both areas have shifted, somewhat.

Oil price

In terms of movement in international prices (which is closely tied to oil prices), these have increased – more so for petrol than diesel – contributing to an under-recovery in the latter of around 50 cents per litre. For diesel, the lower price point has resulted in an over-recovery of the same value.

Oil is heading for a third weekly gain on signs the market is slowly rebalancing as major producers cut supply and consumption recovers after a historic collapse in demand due to the coronavirus, Bloomberg reported.

Brent crude has climbed above $30 a barrel this week – from sub-$10 levels in the not too distant past.

Oil is still down more than 50% this year after a rout that pushed prices below zero and the road back to pre-virus levels of demand looks long and uncertain. OPEC this week presented a bleak assessment of crude markets for the second quarter and the US Federal Reserve warned of a lasting downturn, but efforts to rebalance the market appear to be working.

“Market sentiment has turned cautiously constructive since the end of April and I expect it to remain as such unless there are major setbacks in terms of infection rates,” said Vandana Hari, founder of Vanda Insights in Singapore. Demand expectations will remain “fragile with a nervous eye on how economies fare in reopening,” she said.


The rand and lockdown

While the rand/dollar exchange rate has not improved much over the past month, the currency has settled in the R18.50/$ region, which has resulted in a marginal over-recovery for both petrol and diesel to the tune of 1 cent per litre.

According to Bianca Botes, executive director at Peregrine Treasury Solutions, it has been a largely uneventful week for the rand, but the currency remains tied to global sentiment around the coronavirus and various lockdown measures.

“Key themes remain the same, and little in the way of new developments have reached the markets, leading to a range-bound rand. From a data perspective, the numbers continue to show us the havoc that Covid-19 and the subsequent lockdown has had on economies, and more negative data is expected in the coming weeks,” she said.

Locally, markets will be at the whims of any regulatory movements over the next two weeks, as the country prepares to (mostly) move to lockdown level 3.

While government is yet to provide any details on what will and will not be allowed under this level – or indeed which areas will be allowed to move to it – earlier drafts of the lockdown plan pointed to a greater opening up of the economy.

According to Intellidex analyst Peter Attard Montalto, however, government has indicated that the areas hardest-hit by the coronavirus pandemic will likely remain at level 4. These areas happen to be the most economically active, with the analyst estimating that more than half the country’s economic production could still be subject to tight restrictions.

As things currently stand, at mid-month, the expected changes are a follows:

  • Petrol 95: increase of 49 cents per litre;
  • Petrol 93: increase of 42 cents per litre;
  • Diesel 0.05%: decrease of 56 cents per litre;
  • Diesel 0.005%: decrease of 54 cents per litre;
  • Illuminating Paraffin: decrease of 75 cents per litre.

The table below outlines how these changes could reflect in June, if current conditions persist:

Fuel (Inland) May Official June Expected
95 Petrol R12.22 R12.71
93 Petrol R12.02 R12.44
0.05% Diesel (wholesale) R11.08 R10.52
0.005% Diesel (wholesale) R11.17 R10.63
Illuminating Paraffin R4.49 R3.74

Read: Here’s the official petrol price for May

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Here is the expected petrol price for June