Mid-month data from the Central Energy Fund (CEF) shows that motorists could be in for a positive start to the new year, with petrol and diesel prices set to drop.
The data shows that, should current economic conditions persist, petrol could decrease by between 8 and 17 cents per litre, while diesel is showing a drop of around 2 cents per litre.
This is how the expected changes look mid-month:
- Petrol 93: decrease of 8 cents per litre
- Petrol 95: decrease of 17 cents per litre
- Diesel 0.05%: decrease of 2 cents per litre
- Diesel 0.005%: decrease of 2 cents per litre
- Illuminating Paraffin: decrease of 6 cent per litre
A main drive behind a potential petrol price drop is the stronger rand, which strengthened amid hopes that the US and China will broker a trade agreement.
However, this comes after nationwide blackouts hit the currency as power utility Eskom battled to keep the lights on amid several operational failures.
Eskom has managed to avoid load shedding over the long weekend, as large chunks of business close for the festive season, easing demand.
The lower cost of international petroleum products has also helped.
This is not the case for diesel prices, however. Over the last two months, the production cost of diesel has been far lower than petrol, which has contributed to local diesel prices decreasing, while petrol climbed.
The pendulum has now swung in the opposite direction, with diesel production coming in higher than petrol, undercutting most of the benefit seen by the stronger rand.
International petroleum production is tied closely to global oil prices, which hit a three-month high at the end of last week on the same US-China trade deal optimism that strengthened the rand.
Crude oil is trading between $60 and $65 (for WTI and Brent Crude, respectively) – prices last seen in September 2019.
However, despite the possibility of the trade deal boosting global demand, analysts have warned that there is a looming oversupply will likely lead to a glut in 2020.