Motorists are in for a bumpy ride at the fuel pump as the outlook for petrol and diesel prices remains uncertain heading into January 2025. Daily price fluctuations are expected, with prices swinging between potential increases and decreases, driven by shifts in the rand and global oil prices.
After starting December with an under-recovery, suggesting a potential price hike for January, the situation has improved slightly due to a stronger rand/dollar exchange rate and stable oil prices. According to the latest data from the Central Energy Fund, Petrol 95 is showing a modest over-recovery of 2 cents per litre, while Petrol 93 still faces an under-recovery of 5 cents per litre.
Diesel prices are also fluctuating, with Diesel 0.05% indicating a slight decrease of 1 cent per litre, while Diesel 0.005% is pointing towards a 2 cent per litre increase. These projections remain sensitive to any future changes in the exchange rate or global oil prices, meaning prices could swing either way in the coming weeks.
Current projections for January 2025 include:
- Petrol 93: +5 cents per litre
- Petrol 95: -2 cents per litre
- Diesel 0.05% (wholesale): -1 cent per litre
- Diesel 0.005% (wholesale): +2 cents per litre
- Illuminating paraffin: -11 cents per litre
The more positive aspect of the data is that the trend is currently leaning toward a price cut, with diesel showing a more significant reduction in under-recovery compared to earlier in the month. This improvement is largely attributed to a stronger rand, which has strengthened against the US dollar, dropping below R18.00/$ and moving towards R17.60/$ levels, a recovery from the post-election slump.
The rand’s strength was bolstered by better-than-expected inflation data in South Africa and a weaker US dollar driven by higher US Treasury yields. Bianca Botes, director at Citadel Global, also pointed to anticipation of a likely 25 basis point rate cut by the US Federal Reserve later this month, supported by softening US inflation.
In South Africa, consumer inflation rose slightly to 2.9% in November, narrowly beating market expectations, and economists anticipate inflation will remain below the South African Reserve Bank's 4.5% target mid-point in the near future.
The outlook for oil prices also contributes to the uncertain fuel pricing landscape. Brent crude has been hovering between $73 and $74 per barrel, significantly lower than the $90+ highs seen earlier in 2024. Analysts expect oil prices to remain subdued in the short term, largely due to weaker demand and growing supply, although new sanctions on Russia and Iran could introduce some volatility.
Looking ahead, the trajectory of oil prices will likely depend on China's economic performance, with any new stimulus measures potentially boosting demand and pushing prices higher. However, if such measures do not materialize, pressure on prices could persist.
With several key data releases expected in the coming weeks, fuel prices are likely to stay within their current range, though motorists should remain prepared for further fluctuations as global and local markets continue to evolve.