Petrol Price Cut on the cards in June for South Africa
Data from the Central Energy Fund (CEF) at the end of the month indicates that motorists in South Africa can expect good news at the fuel pumps in June for the petrol and diesel price.
The surplus recoveries for both petrol and diesel have continued to increase over the past week, potentially leading to a price drop of R1.00 per litre.
These are the expected changes:
- Petrol 93: decrease of 100 cents per litre
- Petrol 95: decrease of 100 cents per litre
- Diesel 0.05% (wholesale): decrease of 101 cents per litre
- Diesel 0.005% (wholesale): decrease of 92 cents per litre
- Illuminating paraffin: decrease of 81 cents per litre
This is thanks to a much stronger rand and lower global oil prices in May.
The rand had a strong performance earlier, hitting a low of R18.03/$, but traded poorly at the end of last week.
Overall, the rand has remained relatively firm this month and far from the R19.00/$ seen in months prior.
Bianca Botes, director of Citadel Global, says the market is waiting to see the outcome of the South Africa elections. The elections are only one day away.
She explained that the rand's movement was calm because the US markets were closed for Memorial Day. Additionally, the UK had a bank holiday yesterday.
The rand's value remained stable throughout the day, fluctuating between R18.30/$ and R18.45/$. Traders were cautious because of reduced risk appetite ahead of the upcoming election.
Investec's chief economist Annabel Bishop mentioned that the rand was facing pressure from global interest rate increases. The US Federal Reserve's minutes showed a strong stance on interest rates, adding to the pressure on the rand.
Before this, the rand was looking at possibly strengthening under R18.00 to the dollar.
The US is struggling to reach its inflation target of 2.0% y/y, which is affecting the rand's progress towards R18.00/USD.
In particular, markets read the minutes as underlying a delay in the start of the rate cut cycle.
Nonetheless, it's improbable that the currency will undergo a reversal that could affect fuel prices this late in the month.
The generally robust currency is leading to an excessive rebound in fuel costs of approximately 30 cents per litre.
Oil prices fell to their lowest point since February, but then stabilized before OPEC+ meetings on Sunday.
As per Bloomberg's assessment, Brent futures maintained a position above $82 per barrel, despite experiencing a 2.2% decline last week.
Brent has seen a roughly 7% increase this year, bolstered by ongoing geopolitical threats and OPEC+'s daily output cuts of 2 million barrels. However, futures have declined since mid-April due to diminishing fears that the Middle East conflict would escalate and disrupt oil distribution.
The steady oil price is causing fuel prices to increase by 60 to 69 cents per litre.
A R1.00 petrol price cut will help South African drivers who have faced R3.00 in total increases this year.
Prices can still change before the final announcement and we will make changes next week Wednesday (5 June). The Department of Mineral Resources and Energy is expected to announce the final adjustments sometime before then.
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