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South African motorists could see mixed fortunes at the petrol pumps in May.
Mid-month data from the Central Energy Fund shows there is currently an under-recovery in petrol prices, pointing to an increase next month of between 78 cents and 86 cents per litre.
Diesel drivers, meanwhile, are in line for another cut to fuel prices, with the data pointing to an over-recovery of between 20 cents and 38 cents per litre.
These are the expected changes:
- Petrol 93: increase of 86 cents a litre;
- Petrol 95: increase of 78 cents a litre;
- Diesel 0.05%: decrease 38 cents a litre;
- Diesel 0.005%: decrease of 20 cents a litre;
- Illuminating paraffin: decrease of 39 cents a litre.
The Department of Energy has stressed that the daily snapshots are not predictive and do not cover other potential changes like slate levy adjustments or retail margin changes, which are determined by the department at the end of the month, taking all variables into account.
The DoE makes adjustments based on a review of the entire period. Furthermore, the outlook can change significantly before month-end. Ultimately, the expected price changes are contingent on current market conditions persisting through the end of the month.
Local fuel price fluctuations are impacted by two main factors – the international price of petroleum products, driven mainly by oil prices, and the rand/dollar exchange rate used to purchase these products.
In the first two weeks of April, South Africa’s rand has fluctuated wildly due to both local and global factors; however, it remains on the back foot, trading above R18 to the dollar. Despite the generally weaker positioning, the exchange rate is still contributing to an overall over-recovery in fuel prices, though much smaller than in March.
Oil prices, meanwhile, have surged relative to the pricing in March, resulting in a massive under-recovery in prices.
Rand
The rand has whipsawed quite wildly in April but has maintained an overall weaker tone against the US dollar.
Globally, the local unit has been rattled by global risk aversion, with warnings from the International Monetary Fund over poor worldwide production, which has put a damper on sentiment.
Locally, however, the rand has been hit by the ongoing energy crisis, with markets reacting poorly to warnings from the minister of electricity Kgosientsho Ramokgopa that the country is facing a massive energy shortfall in the approaching winter months in South Africa.
Despite the prevailing negative sentiment towards the rand, the local market is also experiencing boosts from a weaker dollar at times.
On Friday (14 April), the currency strengthened to around R18.05 to the dollar – from R18.50 earlier in the week – supported by expectations that the US Federal Reserve may soon pause its rate-hiking cycle.
However, the rand remains one of the biggest losers in trade against the dollar, having weakened significantly in the year to date, and economists have warned that the rand will need to be much stronger – under R16 to the dollar – to counteract the inflationary impact of rising oil prices.
Oil
Despite pressures on the rand, oil prices are the main contributing factor to expected higher prices in May.
Oil prices surged in April following the surprise move by oil-producing nations (OPEC+) to cut daily production by over 1.1 million barrels a day. This has put pressure on oil supplies and artificially boosted prices from around $74 a barrel before the move to over $85 a barrel after the move.
According to Bloomberg analysis of the market, prices have had four straight week of gains, supported by signs of a tightening global market and a weaker dollar.
“The Organization of Petroleum Exporting Countries said Thursday the market was set for a hefty supply deficit that’ll widen as the year progresses,” it said.
The gains have also been driven by declining US stockpiles, weaker flows from Russia, and interruptions to pipeline supplies from Iraqi Kurdistan. China, the world’s largest crude importer, also showed that oil imports in March swelled to the most in almost three years.
Brent crude is currently trading around $86 a barrel, while WTI crude – which may soon become the new global standard – is above $82 a barrel.
| Inland | April Official | May Expected |
|---|---|---|
| 93 Petrol | R22.64 | R23.50 |
| 95 Petrol | R22.97 | R23.75 |
| 0.05% diesel (wholesale) | R20.89 | R20.51 |
| 0.005% diesel (wholesale) | R20.97 | R20.77 |
| Illuminating Paraffin | R14.72 | R14.33 |
| Coastal | April Official | May Expected |
|---|---|---|
| 93 Petrol | R21.92 | R22.78 |
| 95 Petrol | R22.25 | R23.03 |
| 0.05% diesel (wholesale) | R20.16 | R19.78 |
| 0.005% diesel (wholesale) | R20.26 | R20.06 |
| Illuminating Paraffin | R13.80 | R13.41 |
Read: Warning for petrol prices in South Africa in May
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