Here is the expected petrol price for January

Mid-month data from the Central Energy Fund points to another cut in fuel prices at the start of 2024, with both petrol and diesel expected to come down.

Petrol prices are currently showing an over-recovery of between 63 cents and 76 cents per litre, while diesel is showing a bigger cut of between R1.34 and R1.41 per litre.

If these over-recoveries carry through to the end of the month, motorists and other fuel users will catch a much-needed break when they get back to work in the new year.

These are the expected changes:

  • Petrol 93: decrease of 76 cents per litre
  • Petrol 95: decrease of 63 cents per litre
  • Diesel 0.05% (wholesale): decrease of 134 cents per litre
  • Diesel 0.005% (wholesale): decrease of 141 cents per litre
  • Illuminating paraffin: decrease of 132 cents per litre

Daily snapshot data for LP Gas is not presented by the CEF.

The Department of Mineral Resources and Energy (DMRE) has noted that its daily snapshots are not predictive and do not encompass other possible modifications, such as slate levy adjustments or retail margin changes. The department determines these adjustments, considering various factors, at the end of the month.

Domestic fuel costs are primarily governed by the rand/dollar exchange rate and international oil prices. In South Africa, the fuel price is adjusted on the first Wednesday of every month based on these two factors.

For January 2024, lower oil prices have been working in the favour of motorists – however, the weaker rand relative to the past month is working against the trend.

Rand

The first half of December has seen the rand trade closer to R19.00/$ than in November, which has contributed to a general under-recovery in fuel prices (between 20 and 22 cents per litre).

However, the currency has seen some relief this week following an indication from the US Fed that the FOMC will start cutting interest rates in the States in 2024.

This has boosted risk-on sentiment and strengthened the rand to around R18.50 to the US dollar.

According to Reuters, US interest rates are key to the rand’s performance.

“Investors are used to South Africa offering much higher interest rates than the US, which made rand investments attractive in the past. But following aggressive US rate hikes, that differential shrank and interest offered on rand assets now looks less appealing,” it said.

This – along with load shedding, weak economic growth and South Africa’s relationship with Russia – hit the rand in 2023. The local currency has lost almost 8% of its value over the past year.

Oil

After eyeing a jump higher in October due to the war between Hamas and Israel, oil prices have softened significantly in November and December moving below $75 a barrel.

As with the rand, the hold by the US Fed on interest rates has also helped keep oil prices muted and an index of the dollar weakened to a four-month low, making commodities priced in the greenback more attractive for international buyers.

According to Bloomberg, the Fed gave the clearest signal yet that its aggressive tightening campaign is finished.

“Crude is still down by more than a quarter from a high in late September on a surge in exports from non-OPEC countries and fears the demand outlook is worsening,” it said.

“In addition, the market is sceptical whether deeper voluntary supply cuts by the Organization of Petroleum Exporting Countries (OPEC) and its allies will be fully adhered to.”

Thanks to this prevailing sentiment, local fuel prices are showing an over-recovery of between 83 cents and 164 cents per litre.

Here is how the expected prices could reflect at the pumps.

InlandDecember OfficialJanuary Expected
93 PetrolR22.79R22.16
95 PetrolR23.25R22.49
Diesel 0.05% (wholesale)R21.82R20.48
Diesel 0.005% (wholesale)R21.99R20.58
Illuminating ParaffinR16.24R14.92
CoastalDecember OfficialJanuary Expected
93 PetrolR22.07R21.44
95 PetrolR22.53R21.77
Diesel 0.05% (wholesale)R21.09R19.75
Diesel 0.005% (wholesale)R21.30R19.89
Illuminating ParaffinR15.31R13.99

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