Africa-Press – South-Africa. While markets are still skittish around oil prices, conditions are still supporting a big cut in petrol and diesel prices for November.
According to the latest data from the Central Energy Fund, petrol could be coming down by over R2.00 a litre, while diesel could see a cut of around 85 cents per litre.
The biggest contributor to the current over-recovery (potential cut) in prices are the costs associated with international petroleum products. This is mainly driven by the global oil price.
Oil is currently trading quite high at $93 a barrel, pushed up by the Israel-Hamas conflict in the Middle East.
However, as noted by Investec chief economist Annabel Bishop, the average price to date in October of around $88 a barrel for Brent crude is lower than the $92 a barrel for the same period in September.
Thus, a R2.00/litre cut in the petrol price is building for early November, with close to a 90c/litre drop in the diesel price, she said.
“Oil prices climbed after the advent of the Israel-Hamas war, from US$84/bbl to US$92/bbl. The average for the month in the rand oil price influences the cost of imported petroleum product goods, and hence SA’s fuel prices,” Bishop said.
The oil price moderated slightly this week as the US eased sanctions on Venezuelan oil and other commodity exports from the country, which will allow the tight supply in the oil market to ease somewhat, with prices already lower in anticipation, the economist said.
“Weaker economic activity towards the end of Q3.23 had previously seen a modest slump in the oil price, but expectations are not for a pickup in global economic activity in H2.23, and this has had some counterbalancing, subduing effect on oil prices.”
While the prospects for fuel prices in November look positive for the time being, Bishop echoed warnings from other economists this week that the picture going forward may be dimmer.
“Looking forward, the Israel-Hamas war is not expected to see any rapid resolution currently, and instead risks widening regionally, also leading to sanctions and higher oil prices in particular,” she said.
Economists at the Bureau for Economic Research and RMB warned on Monday that any escalations in the war – especially if it spreads to other nations like Iran and Saudi Arabia – would put oil markets in disarray and could lead to even higher fuel prices going forward.
This is of particular concern in South Africa as rising fuel pricing in September led to a nasty turn in inflation, pushing CPI up to 5.4% for the month. With fuel prices being hiked again in October, this is likely to lead to higher inflation figures for this month as well.
With the South African Reserve Bank (SARB) already hawkish in its views on inflation and global conditions, this may be lining the country up for another interest rate hike when the Monetary Policy Committee (MPC) meets for the last time this year in November.
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