Mid-month data from the Central Energy Fund (CEF) points to
another sizeable petrol and diesel price cut coming in September.

The data from
the CEF shows that petrol prices are slated for a cut of around 65 cents per
litre, while diesel prices are on track for a cut of between 53 to 77 cents per
litre.

Should market
conditions persist until the end of the month, this would be the fifth month of
fuel price cuts, which would put the year-to-date adjustments in positive
territory for motorists.

These are the
expected changes:

• Petrol
  93: decrease of
  62 cents per litre


• Petrol
  95: decrease of
  67 cents per litre


• Diesel
  0.05% (wholesale): decrease of 53 cents per litre


• Diesel
  0.005% (wholesale): decrease of 77 cents per litre


• Illuminating
  paraffin: decrease of
  78 cents per litre

The CEF does
not present daily snapshot data for LP Gas.

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
September, oil prices have been lower relative to July, while the rand has
weakened slightly, undercutting the over-recovery.

Oil prices

Oil prices
are again trading at under $80 a barrel, spelling good news for local fuel
pricing.

The market
has been volatile in recent weeks after the market scare earlier in August when
worries over a possible recession in the United States came to the fore.

Tensions in
the Middle East and a slowdown in the Chinese market—the biggest consumer of
oil—have also been keeping pricing in check.

Pricing has
steadied in recent sessions as nervousness over a potential Iranian attack on
Israel outweighed downbeat China data showing a decline in crude consumption.

According to
analysis by Bloomberg, crude has fallen from a recent peak in early July,
weighed down by a dour outlook for consumption in China, with demand being
damped by growing use of cleaner fuels.

“OPEC lowered
its global demand forecast for 2024 in its monthly report issued earlier this
week, while International Energy Agency data showed the market would be in
surplus next quarter if the cartel went ahead with a plan to restore supply,”
it said.

Brent traded
near $80 a barrel after falling by 3.1% over the previous two sessions. Two
weeks after Iran vowed to retaliate for the killing of a senior Hamas leader on
its soil, tension is building over what form the attack might take.

In China,
apparent oil demand fell 8% from a year ago in July, government data showed
Thursday, exacerbating the dour outlook in Asia’s biggest economy.

Oil prices
and their impact on international petroleum costs are producing a 58- to
82-cents-per-litre over-recovery in local pricing.

Rand/dollar

The rand has
also had a turbulent couple of weeks in August.

The local
unit followed other emerging markets amid the aforementioned market panic at
the start of the month, but was rescued by now-sustained positive shift in
sentiment around the Government of National Unity (GNU) and expected reforms.

According to
Investec chief economist Annabel Bishop, the rand is expected to continue being
volatile, given the start of the interest rate cutting cycle lying ahead.

Markets
widely expect the United States Fed to start cutting rates in Septemeber (and
into the new year), which would be supportive of a stronger rand. However, the
local Reserve Bank is also expected to start its cutting cycle at the same
time, which will keep the rand muted.

However, the
outlook for the rand is very bulling, with the unit expected to continue
feeding off positive sentiment in the market.

It is
currently trading at R18 to the dollar—a much stronger showing than the
R18.60/$ position after the market panic. However, it is still weaker relative
to July, where it was under R18.00 off the back of the positive outcome of the
2024 elections and setting up of government.

The weaker
rand relative to July is causing a 5 cents per litre under-recovery in local
pricing.

This is how
the price changes will reflect at the pumps (Diesel prices reflect wholesale,
pump prices will differ):