Mid-month data from the Central Energy Fund (CEF) indicates that motorists in South Africa may experience a mixed outcome regarding fuel prices in May.
Similar to April, petrol prices currently reflect an under-recovery of approximately 30 cents per litre, signaling a potential fourth consecutive price increase next month.
In contrast, diesel shows an over-recovery of around 28 cents per litre, suggesting a possible price decrease.
Expected changes include:
Petrol 93: anticipated increase of 30 cents per litre
Petrol 95: anticipated increase of 31 cents per litre
Diesel 0.05% (wholesale): expected decrease of 26 cents per litre
Diesel 0.005% (wholesale): expected decrease of 31 cents per litre
Illuminating paraffin: expected decrease of 19 cents per litre
The CEF does not provide daily snapshot data for LP Gas.
The Department of Mineral Resources and Energy (DMRE) clarifies that its daily snapshots do not forecast future outcomes and do not encompass other potential adjustments, such as slate levy modifications or retail margin changes.
These adjustments are determined by the department at the end of each month, considering various factors.
The main influencers of domestic fuel costs remain the rand/dollar exchange rate and international oil prices. In South Africa, fuel prices are adjusted on the first Wednesday of each month based on these factors.
Oil prices fell on Monday as investors reduced risk premiums following Iran's weekend attack on Israel, which the Israeli government reported caused limited damage.
Brent futures for June delivery dropped by 50 cents, equivalent to 0.5%, reaching $89.95 per barrel by 0630 GMT. Meanwhile, West Texas Intermediate (WTI) futures for May delivery were down by 52 cents, or 0.6%, at $85.14 per barrel.
Iran's attack involved over 300 missiles and drones, marking the first such attack on Israel from another country in over three decades. This event has raised concerns about the possibility of a broader regional conflict impacting oil traffic in the Middle East.
Although oil prices have retreated from highs around $92 per barrel, they remain below the $90 threshold. However, this level is still significantly higher compared to the beginning of the year when prices were around $75 per barrel, and even more recently, hovering around $85 per barrel.
Analysts at Citi Research suggested that ongoing tensions throughout the second quarter of this year have largely stabilized oil prices within the $85-$90 per barrel range.
Given the balanced supply and demand dynamics in the market during the first quarter, any easing of tensions could potentially lead to a sharp decline in prices to the high $70s or low $80s per barrel range.
"What is not priced into the current market, in our view, is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade up to over $100 per barrel depending on the nature of the events," the Citi analysts said in a note.
South Africa is heading into unchartered political terrain and investors are growing increasingly anxious. The rand traded at R18.85/$ - from a high of R18.43 last wednesday, its best level since the start of the year.
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