South Africa’s cash-strapped motorists will be getting a welcome Januworry gift, with fuel price reductions of between R1,89 and R2,59, depending on their cars’ juice of choice.
The Automobile Association released a statement on Friday morning welcoming the data from the Central Energy Fund, announcing that the prices of diesel, petrol, and illumination paraffin are all set to decrease significantly next Wednesday.
All fuel grades and types to decrease
“According to the data, petrol (both grades) will decrease by around R1.85/litre, diesel will decrease by between R2.47/l and R2.59/l and illuminating paraffin will decrease by around R1.93/l,” says the AA.
According to market analysts, the positive turn for the rand comes as local political uncertainty eased following a solid victory for president Cyril Ramaphosa at the ANC’s 55th elective conference in the middle of the month, as well as a softer dollar as risk sentiment improves.
Analysts said that the dollar has been over-valued for some time, given the risk-averse market conditions being driven by a year littered with rate hikes at major central banks – but the sentiment is now shifting, and the greenback could soften even further.
Risk – both locally and abroad – is still priced into markets, however, with more volatility expected in 2023. But, for now at least, currency exchanges are working in favour of local motorists.
Global oil prices are telling a different story.
The price of a barrel of Brent Crude is slowly increasing. After hovering around $80 a barrel for much of December, the price has slowly climbed to $84 a barrel, and appears to be trending up.
According to Bloomberg analysis, oil rallied to a three-week high and clinched a second straight weekly gain after Russia warned it may cut output by as much as 700,000 barrels a day in response to sanctions on the nation’s crude.
With trading volumes dwindling, Russia’s threat outweighed the impacts of a winter freeze sweeping across the US. The cold has halted one-third of refining capacity on the Texas Gulf Coast and as much as 350,000 barrels a day of crude output in North Dakota.
Crude is still on track for a modest yearly gain after a volatile year when Russia’s invasion of Ukraine upended oil markets. The invasion led G7 countries to impose a $60-a-barrel price cap on Russian crude in an effort to reduce the Kremlin’s income while keeping exports on the market.
Adding uncertainty to global oil markets is the China problem. The world’s second-largest economy has abandoned its zero-Covid policy – a scenario favouring growing demand for oil and thus higher prices. However, market watchers are concerned over China’s ability to deal with the Covid crisis, as the country experiences record numbers of infections.
Complicating matters is China dropping the daily reporting of case numbers, making it difficult for analysts to gauge the economic impact of the pandemic.
For now, while trending upward, even at $84 a barrel, oil prices are significantly lower than the $100 a barrel mark that drove local fuel prices so much higher in the middle of the year, and prices still support a fuel price drop in South Africa next month.
The Department of Energy is expected to announce the official petrol and diesel price changes before the come into effect next Wednesday (4 January 2023).
