After starting the month on the back foot, a swing in fortunes is in play for diesel prices in South Africa – with a sizeable under-recovery turning into a flat balance – and stirring hope for next month.

The latest data from the Central Energy Fund (CEF) shows that diesel prices have moved from an under-recovery of around 65 cents per litre at the start of the month to a flatter rate, ranging from -0.5 cents per litre to an over-recovery of 1 cent per litre.

While a better indication of the overall direction for prices can be gauged close to the middle of the month, this shows a positive swing.

A flat or even positive move for diesel prices will be some welcome relief to industry in South Africa – particularly those in the logistics and agricultural sector where diesel vehicles are used.

These industries have had to contend with significantly higher diesel prices in 2024, following a price hike of R1.80 per litre in January and February.

Petrol price hope

The same swing can be seen in the recoveries for petrol prices – though the bad news for motorists is that petrol is still showing an under-recovery, just much smaller at around 35 cents per litre (versus the R1.00 per litre at the start of the month).

The main driver behind the stronger recovery in fuel prices is a much more supportive rand/dollar exchange rate, with the local unit sticking well below the R19/$ mark at around R18.70.

The lower global oil price has also made a marked difference, though it remains range-bound and is still contributing to an under-recovery in prices.

According to Investec chief economist Annabel Bishop, oil markets are showing volatility due to demand patterns, supply issues, and disruptions in the Middle East.

Outside of petrol and diesel prices, higher global oil prices also impact the wider economy.

“From an inflation point of view, higher crude oil prices place upwards pressure on targeted inflation measures, and risk further delaying the start of the interest rate cut cycle, which will also contribute to the moderate nature of growth,” Bishop said.

According to Bloomberg analysis, oil traders are in a ‘wait to see’ mode to asses data coming out this week, including US inflation data and market reports from oil-producing countries.

For hope to persist, however, motorists will have to bank on the rand remaining in its relatively stronger positioning and for global oil prices to stabilise or even come down.

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