Mixed outlook for fuel prices in June as oil battles the rand

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The rand's "surprising strength" is helping to offset the oil price gains, according to the AA.
The rand's "surprising strength" is helping to offset the oil price gains, according to the AA.
  • Currently, the price of petrol may be on track for a slight cut, while diesel may head higher in the first week of June.
  • But this latest price forecast, released by the Central Energy Fund, could still change over the next two weeks as the oil price and rand exchange rate fluctuate. 
  • Of late, oil has moved higher, while the rand breached the R14/$ level last week.

The petrol price is currently on track for a slight decline in the first week of June, while diesel prices may head higher.

According to the latest price forecast, released by the Central Energy Fund, the price of petrol should decline by a cent per litre in the first week of June. But there are still two weeks left before the June price is fixed, and movements in the oil price and the rand may still have a big impact.   

Diesel is currently on track for a 20 cents per litre increase. A 25 cents-per-litre increase is on the cards for illuminating paraffin.

In May, petrol (both 93 and 95 ULP and LRP) dropped by 9 cents per litre. This was after after a record hike of 100 cents per litre for petrol in April, which left petrol in R17/l territory. Revised fuel and road accident fund levies had also kicked in.

This month, higher oil prices are putting pressure on fuel prices.

"After several weeks of stability, international oil prices have started to climb again, with a slight peak in the first week of May before a modest pullback. Although there is still a re-balancing of global supply and demand taking place in oil markets, the current variations are starting to more closely resemble the picture we saw before the Covid-19 pandemic," the Automobile Association (AA) said in a statement.

"This suggests that normal market forces are increasingly gaining the upper hand over last year's disruptive gluts which led to astonishing sub-zero prices for West Texas Intermediate (WTI) oil."

However, the AA notes that oil prices are still vulnerable to lockdowns caused by resurgences of Covid-19, in particular new variants of the virus.

"Nothing should be taken for granted until the global vaccination drive has surpassed the threshold needed for herd immunity," says the AA.

Rand help

Furthermore, the rand's "surprising strength" is helping to offset the oil price gains, according to the AA.  

"Although the daily exchange rate has been wildly variable, the average rate has seen the local currency gain around 20 cents against the US dollar since the start of May. This means a net gain of around 11 cents against the dollar," the association notes.

The rand strengthened to below R14/$ last week, but has since moved back to around R14.15. 

It further notes that, while the mid-month picture is indicating certain movements now, these are likely to change before the official adjusted price for June is announced by the Department of Mineral Resources and Energy later this month.

"The oil-versus-Rand see-saw will likely continue through the rest of May, and the month-end picture may be somewhat different to what's currently being seen," said the AA.

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