Here is the Expected Petrol price for January

Mid-month data from the Central Energy Fund (CEF) shows that South African motorists are in for a very happy new year, with both petrol and diesel prices expected to come down significantly.

According to the CEF’s data, as of 14 December 2022, petrol prices are expected to come down by as much as R1.90 a liter, while diesel is on track for a much larger R3.00 drop.

The Department of Energy has stressed that the daily snapshots are not predictive and do not cover other potential changes like slate levy adjustments or retail margin changes, which are determined by the department at the end of the month, taking all variables into account.

The DoE makes adjustments based on a review of the entire period. Furthermore, the outlook can change significantly before month-end. Ultimately, the expected price changes are contingent on current market conditions persisting through the end of the month.

Local fuel price fluctuations are impacted by two main factors – the international price of petroleum products, driven mainly by oil prices, and the rand/dollar exchange rate used to purchase these products.

In the first half of the month, global oil prices dropped significantly, thus contributing to a sizeable under-recovery for both petrol and diesel prices. Meanwhile, the rand has maintained a relatively stronger position, also boosting the expected drop.

OIL PRICES

Global Oil Prices Dropped in The First Two Weeks of December, Currently Sitting at A Spot Price of $81 per Barrel, Down from Around $87 a Barrel at The Start of The Month.

Prices dipped to as low as $72 a barrel during the course of the month, as worries over supply constraints dissipated – although prices rallied in recent sessions after the International Energy Agency (IEA) indicated that 2023 oil prices may rise.

Oil prices have been pushed to and fro by contrasting narratives on the demand outlook.

Supply constraints – favoring higher prices – have been led by OPEC+ nations threatening to make good on promises to cut around 2 million barrels a day from production to keep prices elevated. At the same time, issues on critical pipelines in the US have also pushed spot prices higher.

However, supply issues have been tempered by a lower demand outlook from China, as well as sanctions on Russian oil, which are perceived to be ineffective.

Both these narratives are expected to play out in the coming months. According to Bloomberg, the recent rally is based on the IEA’s forecast that Russian sanctions may be more effective than previously expected.

Rand

The rand has had a rough two weeks, having ended November on the back foot following the fallout of the Phala Phala report on president Cyril Ramaphosa.

The report pushed the rand from under R17.00 to the dollar to over R17.50 to the dollar in the span of a couple of days as speculation spread that the president was going to resign.

After Ramaphosa’s announced a fightback against the report, markets settled, but not at previous levels. The rand continued to face pressure amid the political uncertainty until the report was quashed in parliament this week.

There is no rest for the currency, however, as the resignation of Eskom CEO Andre de Ruyter on Wednesday (14 December) caused another stir in markets as South Africa’s energy plans and future control over the load-shedding crisis were cast into doubt.

Aside from local politics and machinations, the rand is still undervalued, driven by the whims of global markets. Inflation remains high, and global central banks and the South African Reserve Bank are still on a rate-hiking path, keeping investors out of riskier markets.

While the tone on rate hikes is shifting – with the US Fed announcing a 50bps hike on Wednesday, breaking from the trend of 75bps hikes – market conditions still favor safer assets.

The dollar is softer on this shift, but South Africa’s political own-goals are keeping the full benefit of these prevailing conditions at bay.

Sourced from: Bussinestech