Here is the expected petrol price for August

Motorists in South Africa are in for a tougher August, with petrol prices looking flat and diesel in for a steep hike.

According to mid-month data from the Central Energy Fund, petrol prices are fairly flat, with Petrol 93 in for a slight drop and Petrol 95 in for a slight increase.

Diesel, meanwhile, could be climbing by around 50 cents per litre.

These are the expected changes:

• Petrol 93: decrease of 4 cents per litre
• Petrol 95: increase of 4 cents per litre
• Diesel 0.05%: increase of 47 cents per litre
• Diesel 0.005%: increase of 47 cents per litre
• Illuminating paraffin: increase of 46 cents per litre

The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, which consider various factors, at the end of the month.

Domestic fuel costs are primarily governed by the rand/dollar exchange rate and international oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.

Rand

While the rand ended last week on much stronger footing, the currency remains weak and highly volatile against the dollar.

The local unit ended the week just above R18 to the dollar after briefly dipping below that level as the greenback softened on market hopes that the US Fed’s hold on interest rates might linger longer.

The rand has shaken off most of the local factors that have pushed it to extremely weak levels against other major currencies in recent months – load shedding, geopolitical missteps, etc – and is once again at the whims of global market movements.

Better-than-expected US CPI data weighed on the US dollar last week, which led to a risk-on sentiment in the market. With riskier assets back in favour, the rand benefitted greatly.

However, as has been the case for some time now, the market can turn very suddenly, and the rand is one hawkish comment from the Fed away from being back in the doldrums.

If the rand strength persists, however, this will work in the favour of motorists hoping for lower fuel prices. The rand/dollar exchange rate is currently contributing to a 1.5 cent under-recovery in fuel prices.

Oil

The real culprit behind the expectations of a fuel price hike is the rising price of oil, which has climbed to just under $80 a barrel, from around $75 a barrel at the start of the month.

According to Bloomberg analysis, crude oil futures have been in the doldrums for most of this year, but are staging a recovery in July.

Last week saw oil climb around 7%, with brent crude futures climbing above $80 a barrel for the first time since April.

The rally comes amid a rebound in demand in China and elsewhere, as well as production cutbacks by Saudi Arabia and its OPEC+ allies that are set to drain stockpiles around the world.

However, the analysts pointed out that oil prices are still down between 6% and 7% this year, which has aided lower prices locally so far.

This is how the expected changes would reflect at the pumps:

Read: How South Africans could save up to R700 on a tank of petrol