Motorists in South Africa are in for a mixed bag in May, with data for the first week of April pointing to a sizeable petrol price hike on the way. Diesel drivers, however, could be in store for another cut.<\/p>\n
The latest snapshot data from the Central Energy Fund for 10 April 2023 shows an under-recovery (thus increase) in petrol prices of between 63 cents and 70 cents per litre.<\/p>\n
Diesel prices are showing an over-recovery (thus decrease) of between 38 cents and 50 cents per litre.<\/p>\n
Local fuel prices are tied to two key factors: the rand\/dollar exchange rate and the price of oil. Oil prices factor into the cost of international petroleum products in the market, while the rand\u2019s strength determines the cost of importing these products and fuel in general.<\/p>\n
March was a close call for petrol prices, with fluctuating oil prices and rand strength ultimately leading to a flat outcome in April. Petrol 93 saw prices come down by 1 cent per litre (inland) and petrol 95 was up by 2 cents per litre.<\/p>\n
However, both indicators have worked against local petrol prices in the first week of April, with oil prices climbing higher and the rand coming in weaker against the dollar.<\/p>\n
According to Bloomberg analysis, oil prices are elevated as traders look ahead to a slew of market data that\u2019ll shed light on supply-demand trends after OPEC+ cut production.<\/p>\n
Oil prices started climbing last week after the OPEC+ region surprised markets by cutting over 1.1 million barrels of oil a day from production, pushing the price of brent crude back to $84 a barrel, after trading at around $75 for the latter weeks of March.<\/p>\n
“Crude has rebounded from a 15-month low hit in March as a concerns over a banking crisis faded, US stockpiles fell, and the Organization of Petroleum Exporting Countries and its allies cut output. In addition, there have been disruptions to supply, including a halt to pipeline flows from Iraq to Turkey,” Bloomberg said.<\/p>\n
Rising oil prices threaten to push up inflation on top of local fuel prices. Investec chief economist Annabel Bishop warned that the rand would have to strengthen significantly to counter-act the effect of rising oil.<\/p>\n
South Africa would have to see the rand under R16 to the dollar to achieve this, she said, but that would require more rate hikes from the South African Reserve Bank – something unlikely to go over well with debt holders.<\/p>\n
Making matters worse, the rand is in fact going in the opposite direction, weakening on Friday to well above R18 to the dollar.<\/p>\n
Analysis by TreasuryOne noted that Friday\u2019s better-than-expected US labour data saw the dollar bounce back against majors as markets started to price in another rate 25 bps hike by the Fed in May.<\/p>\n
“The rand weakened sharply, falling nearly 1.7% to above R18.50 in a very thin market. The rand is currently around the R18.46 mark, and we could see some further retracement in the local currency,” the group said.<\/p>\n