In spite of fuel prices in South Africa forecast to experience a significant decline in June, motorists could soon find themselves digging deeper into their pockets as oil-producing countries are set to ramp up the international price of Brent Crude oil.
This comes on the back of the Organization of the Petroleum Exporting Countries and its allies (Opec+) meeting where members agreed to extend oil supply cuts into 2025, and review voluntary cuts of 2.2 million barrels per day which are set to expire at the end of June.
Opec+ ministers met in Riyadh yesterday where Saudi Arabia and its partners were widely expected to prolong supply cuts into the second half of 2024 and implement deep cuts in 2025.
Oil-producing countries such as Saudi Arabia, Kuwait, United Arab Emirates, Oman, Kazakhstan, Iraq, Russia, and Algeria have been implementing the latest tranche of the voluntary cuts.
This could potentially raise oil prices as European summer travel boosts demand and the US election campaign intensifies.
The oil market has been pressured recently by concerns that prolonged higher borrowing costs could slow economic growth and reduce oil demand.
Several US Federal Reserve (Fed) officials have indicated the need for more time to ensure inflation is cooling before considering rate cuts.
Citadel Global director Bianca Botes on Friday said the oil market was being pressured by a number of multiple factors.
“Concerns over prolonged high US interest rates and reduced demand for energy resources pressured the market, despite recent inventory declines in the US,” Botes said.
“The potential impact of upcoming Opec+ meetings adds to market uncertainty.”
Brent Crude oil prices slowed to $81.30 (R1 530) per barrel yesterday, down from $82.63/barrel on Thursday, continuing a week of volatility marked by a high of $84.96/barrel and a low of $80.72/barrel.
Last week, SA Reserve Bank Governor Lesetja Kganyago said oil prices were back to where they were at the start of the year, close to $80 per barrel, after briefly exceeding $90.
“Although geopolitical tensions are far from resolved, some of the more adverse economic scenarios, such as oil prices above $100 per barrel, appear less probable now,” Kganyago said.
“Our own forecast suggests oil prices will remain near their current levels.”
The price of both grades of petrol (93 ULP and LRP, and 95 ULP and LRP) rose by 37 cents a litre in May, hiking a litre of 95 petrol from R25.49c a litre to R25.12 in Gauteng following another price hike of up to 67c in April.
However, the unaudited data from the Central Energy Fund (CEF) last week showed that petrol prices in South Africa were likely to come down by around R1.06 per litre in June, while diesel was looking set to decrease by between 90c and R1 per litre.
June’s predicted price decreases come mainly as a result of lower international oil prices, which have contributed about 73c to the month’s petrol price over-recovery, while a stronger rand pushed the equation into the green by a further 32c.
These strong over-recoveries could see the price of 95 Unleaded petrol falling to around R23.64 per litre at the coast, and R24.43 per litre inland where 93 Unleaded will decrease to around R24.09.
Motorists and consumers have been dealt a particularly hard blow this year, with the price of 95 Unleaded having risen by R2.93, and diesel rising by between R1.46 and R1.45 since January.
BUSINESS REPORT