South African motorists all but guaranteed more relief at the pumps in October, with the latest data on petrol and diesel prices showing a persistent over-recovery – and market conditions solidifying the lead.<\/p>\n\n\n\n
According to the latest data from the Central Energy Fund for the end of the third week in September, petrol and diesel prices are lined up for a hefty cut.<\/p>\n\n\n\n
Petrol prices show a strong over-recovery of between R1.10 and R1.17 per litre, and diesel prices show an over-recovery of around R1.11 per litre.<\/p>\n\n\n\n
These are the expected changes:<\/p>\n\n\n\n
Market conditions have shown a persistent over-recovery throughout the month, with little change expected.<\/p>\n\n\n\n
Global oil prices remain locked and bound to a tight range, lower than the month prior, and the rand has weathered the volatile interest rate announcements from the US Fed and South African Reserve Bank this week.<\/p>\n\n\n\n
Oil pushed higher this week\u2014the largest advance since February\u2014after the US Fed cut its interest rate by 50 basis points.<\/p>\n\n\n\n
The move pushed global prices for Brent crude up to $74 a barrel. However, this is still well below the trading prices seen in August, accounting for the bulk of recoveries in the local pricing for fuel.<\/p>\n\n\n\n
According to Bloomberg analysts, oil traders are continuing to monitor simmering tensions in the Middle East, which, if they escalate, could impact oil markets.<\/p>\n\n\n\n
A series of walkie-talkie and pager explosions this week has raised fears of a full-blown war between Iranian-backed Hezbollah and Israel, which neither confirmed or denied responsibility for the attacks. There are concerns that a wider conflict could involve Iran and threaten crude flows from the region.<\/p>\n\n\n\n
“Oil is still heading for a quarterly loss as signs of ample supply and China\u2019s economic slowdown weigh on the market. The Fed move to start cutting rates has provided room for the Asian nation to provide more monetary and fiscal stimulus,” Bloomberg said.<\/p>\n\n\n\n
\u201cIt remains to be seen whether the Fed\u2019s interest-rate cut will mitigate downward risks for oil on the macro level. Fundamentals remain bearish, and the market should stay vigilant about risks that are still skewed to the downside.\u201d<\/p>\n\n\n\n
The rand, meanwhile, has a more volatile week, seeing several ups and downs around the Fed’s and the SARB’s interest rate cuts.<\/p>\n\n\n\n
The rand continues to break through the R17.70\/$ critical resistance level due to the weakness of the US dollar ahead of the US interest rate cut on Wednesday, but came under pressure following the move.<\/p>\n\n\n\n
This was followed by the 25 basis point rate cut by the SA Reserve Bank on Thursday\u2014the first cut in four years\u2014which boosted the rand thanks to it being lower than the Fed cut (widening the differential), supported by a softer dollar.<\/p>\n\n\n\n
According to Investec chief economist, Annabel Bishop, the rand is likely to remain on the firmer path heading into the last few months of the year, supported by positive sentiment around the Government of National Unity, and the anticipation of another 25 basis point cut to rates in November.<\/p>\n\n\n\n
In the immediate term, however, there are not obvious risks baked into the currency that could see it reverse course enough to tank petrol and diesel price recoveries.<\/p>\n\n\n\n
Similarly, the oil market in the near term\u2014while facing risks of escalation in the Middle East\u2014is unlikely to swing wildly enough in the coming week to influence October prices.<\/p>\n\n\n\n