South Africa has received another petrol price cut for the month of July. The prices are set to come down by over R1 per litre and diesel by between 48 cents and 55 cents per litre.
According to the latest data from the Central Energy Fund (CEF), tracks the movement in the price of oil and the rand-dollar exchange rate to calculate the expected fuel price.
The motorists have experienced a significant cut in the prices of petrol, at the beginning of the month, with the prices coming down sharply across all grades of fuel.
The prices of Petrol have come down by R1.24 per litre and between R1.09 and R1.19 per litre for diesel. It was largely due to the strong performance of the rand due to financial markets reacting positively to a coalition between the ANC and the DA.
The local currency was also boosted by positive economic data coming out of China, as the largest consumer of commodities, has a significant impact on the prices of raw materials. When translated into rand strength, South Africa’s foreign exchange earnings will be boosted by the increased demand.
There are reasons for a potential cut in fuel prices, in July which are completely opposite, with the rand weakening slightly on the back of political uncertainty.
Moreover, so far in June, the price of oil has declined to $82 per barrel due to reduced demand as economic activity in developed markets is expected to get slow.
It has resulted mainly in the CEF pencilling due to the cuts to the prices of the various types of fuels in South Africa next month; Petrol 93 has seen decrease of R1.18 per litre, Petrol 95 has decreased till R1.12 per litre.
Diesel 0.05% selling in wholesale has seen decrease of 55 cents per litre and diesel 0.005% for wholesale has seen decrease of 49 cents per litre.
These decreases are expected to not remain for longer time as it demands for oil to recover as the northern hemisphere moves into summer and residents where it begins to drive more.
Notably, more shocks are expected to be received from the conflict in the Middle East and oil producers who will maintain their production cuts for longer to artificially raise the price of oil.
The International Energy Agency has flagged a major surplus this decade as the shift away from the fossil fuels have accelerated. The oil-producing nations (OPEC+) is not very keen on this.
Grouping in the past has moved to artificially inflate the prices when risks of big drops have become apparent. After that Russia announced this week that it would be cutting production by an additional 400,000 barrels on top of the 500,000 it has already committed to cutting.