Petrol price drop expected for February

Motorists can expect petrol prices to remain fairly flat next month (February), however those people who drive diesel cars can expect prices to go up.

This is according to the latest mid-month fuel price changes published by the Central Energy Fund.

The group shows an over-recovery of 8 cents per litre for 95 grade petrol (meaning a price drop on the cards), while 93 grade remains flat, with the chance of a fractional increase of 1 cent per litre.

Diesel, meanwhile, shows a larger under-recovery of 12 cents per litre for both 0.05% sulphur content and 0.005%.

The two measures used in calculating the changes in local fuel prices – the rand/dollar exchange rate, and the price of international petroleum products – have seen some changes over the last two weeks.

Exchange rate

The rand has lost some ground against the dollar in recent trading sessions, largely driven by ongoing trade discussions between the US and China, compounded by a host of local issues.

Economists point out that South Africa, although ‘small’ in a global economic sense, it is still connected, and is therefore exposed to global headwinds.

Locally, load shedding continues to dominate discussion with the electricity system expected to face increased pressure as more people return to work in January.

“While the lights have remained on in SA for the past few days, municipalities have been notified to adjust their load shedding plans to accommodate stage 8 (40% of load being shed), which is weighing on growth prospects for the country,” said Peregrine Treasury Soltions partner, Bianca Botes.

While the US and China are set to sign the first phase of their trade deal on Wednesday (15 January), it’s looking like tensions between the two will remain high, Bloomberg reported.

The reason, it said, is that existing tariffs on billions of dollars of Chinese goods coming into the US are likely to stay in place until after the American presidential election in November, and any move to reduce them will hinge on Beijing’s compliance with the terms of the phase-one accord.

Analysts are also looking to a rates decision by the Reserve Bank’s Monetary Policy Committee this week, as well as commentary from ratings agencies ahead of the 2020 budget speech to be held in February.

International prices

In terms of international petroleum prices, the cost of producing diesel is showing a trend downwards after a sharp increase in November and December 2019. However, these costs remain pricier than petrol production costs, leading to the price fluctuations when compared to petrol.

International petroleum costs are mainly driven by changes in oil prices, which spiked over talk about a potential war between the US and Iran, but has since stabilized to around $64 for Brent Crude.

Analysts noted that the market has a strong over-supply of oil, which will put prices under pressure again as stocks build up in key markets.

Locally, the price of petroleum has remained fairly stable, with mid-month prices at the same level as was recorded at the start of December 2019.

The table below outlines how the petrol price could change based on mid-month estimates:

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