SA heavy reliance on Saudi Arabian oil imports could negatively affect the price of fuel in SA, given the significant dent to Saudi’s oil supplies following Saturday’s attack, says Sanisha Packirisamy, economist at Momentum Investments.
The bulk of SA’s oil imports came from Saudi Arabia (42%) in the first quarter of this year, followed by Nigeria (34%), Angola (13%) and Ghana.
On Saturday, ten drones struck two Saudi oil facilities – which affected half of that country’s oil output, or 5% of the world’s oil supplies. This triggered a record spike in the oil price, which jumped by 20% on Monday to above $67 a barrel. The oil price has since cooled to around $63, but the rand also took a hit. It almost broke through the R14.50/$ level last week, but was last trading at R14.62/$ on Wednesday.
Together, the stronger oil price and the weaker rand will probably dash all hopes of a petrol price cut in the first week of October.
Based on the latest data from the Central Energy Fund (CEF), unleaded 95 octane petrol was due to be hiked by almost 2c a litre. Earlier this month it was on track for a 11c cut.
"Both a weaker rand-dollar exchange rate and a higher international price of oil could feed through quite quickly into the inflation basket given the relatively quick pass-through into SA transport prices. Fortunately, demand pull inflationary pressures and the currency pass-through in SA has proven to be limited in recent months suggesting, inflation is likely to stay within the target band and should thus not force the Reserve Bank’s hand to hike interest rates in a weak growth environment, all else equal," says Packirisamy.
The Reserve Bank's monetary policy committee is currently meeting and will announce its interest rate decision on Thursday.
Impact from Iran
While a measure of calm has returned to the oil market, investors are concerned about escalating tensions between the US and Iran. The US is accusing Iran of being behind the Saudi attacks.
"During its peak, SA imported as much as 35% of its oil from Iran, but after pressure emanating from the United States many years back, SA cut back significantly on its oil imports from Iran," says Packirisamy.
"Consequently, any direct impact on Iran will have a contained effect on SA given the country’s limited exposure to Iran in terms of both imports and exports of goods and services."