If the rand holds out at current levels, South African motorists could enjoy a drop in petrol and diesel prices from the beginning of June.
Department of Energy data is pointing towards a decrease of around 20 cents a litre for both petrol and diesel, although this could be eroded if the local currency weakens or if oil prices continue to surge.
The rand and international oil prices both tracked weaker earlier in the month, but the former was able to offset the latter. Both have been stronger in recent days, with the rand hitting an almost three-week high at R13.15 to the US dollar on Monday, while crude oil prices have risen on news that both Russia and Saudi Arabia plan to extend their production cuts in a bid to curb the global over-supply situation that’s kept prices low.
Yet things are still balanced in favour of a price cut for June. While the rand/oil interplay for the first half of May averages out to a 20 cent cost-recovery, recent daily fuel price data points towards a price decrease of around 25 cents if current trends persist.
However, the Automobile Association cautions against being too optimistic as much could still change between now and month-end.
"Internationally, Opec seems set to stay the course with its production cuts, and on the local front, ratings agency Moody's is likely to make an announcement on its view of South African sovereign debt, which is anticipated to be negative," the AA warned.