South African motorists are in line for a petrol and diesel price cut in September, with both the exchange rate and global oil prices now contributing to an over-recovery.
Central Energy Fund (CEF) data for the end of the third week in August shows that petrol prices are lined up for a small cut of between 6 and 14 cents per litre.
Diesel prices, meanwhile, are in for a bigger cut of around 52 cents per litre.
This is a much improved position from the beginning of the month when the rand/dollar exchange rate was still in the negative, undercutting the drop in global oil.
The pendulum has swung in the other direction, however, with movements in the exchange rate now flat, tilted slightly to an over-recovery (+0.3 cents per litre).
These are the projections at mid-month:
The main driver of the likely cut is the global oil price, which has fallen about 10% this year. Importantly, the price in August has been lower than in July.
While prices had dropped to about $66 a barrel earlier in the month, it has since climbed back up to around $68 a barrel. However, this is still lower than last month, hence the over-recovery for fuel.
Market analysis by Bloomberg pointed to prices holding steady as forecasters weighed the outlook for Russian crude flows to India after a Trump administration official ramped up his criticism over the trade ahead of an expected tariff increase.
White House trade adviser Peter Navarro blasted India again for continuing to buy Russian oil and said he sees US import levies on the nation doubling as planned on 27 August.
“India doesn’t appear to want to recognise its role in the bloodshed,” he said. “They don’t need the oil. It’s a refining profit-sharing scheme.”
US President Donald Trump has threatened to raise the duties on Indian imports to the US to 50%, half of which would be due to purchases of Russian crude.
Still, oil refiners in the South Asian nation have returned to buying after a brief pause, while an official from Moscow expects flows to be maintained.
Earlier this week, Navarro claimed that the surge in Russian imports since the war in Ukraine was driven by “profiteering by India’s Big Oil lobby” and not domestic needs.
Oil remains lower for the year as OPEC+ ramps up production and Trump’s trade policies spark concerns over demand.
The fundamental outlook for the market remains bearish, with global demand seen lower, with significant inventory builds expected from next quarter.
The rand has been in something of a ‘zombie-mode’ in August, not being as highly reactive to local and global events and data.
The currency is typically volatile, but has mostly shrugged off the implementation of the Trump tariffs, hotter local inflation and wider geopolitical issues, trading in a tight range.
The currency did lose some ground this week due to a stronger dollar and reports of higher inflation from Stats SA, but this is still not much changed from the R17.60-R17.80 range it has held for most of the month.
According to Nedbank, investors stayed cautious ahead of the US Federal Reserve’s Jackson Hole symposium, subduing global risk appetites.
Locally, inflation was slightly higher, adding uncertainty to the SARB’s policy outlook.
By close on Thursday, it had slipped to around R17.72 to the dollar. On Friday, the rand is trading around R17.73/$.
“The dollar strengthened across the board after the minutes from the Federal Open Market Committee’s July meeting, which suggested that the committee remains cautious,” Nedbank said.
“This fueled expectations that the Federal Reserve might maintain higher interest rates for longer.”
Given the limited movement and apparent resilience of the rand against the dollar, its contribution to fuel price recoveries has also been subtle.
The current rate is contributing only a fraction to recoveries, tilted towards an over-recovery of just 0.3 cents per litre.
This reflects a positive move from the start of the month, however, when there was a negative contribution of about 20 cents per litre.
