Motorists could be in for another big petrol price cut in September as global oil prices have fallen into a bear market on fears of weakening fuel demand due to the looming recession.
This comes as fuel prices eased for only the second time this year at midnight as the price of both types of petrol fell by R1.32, while diesel decreased by 88 and 91 cents, and illuminating paraffin was slashed by R1.44 per litre.
Falling fuel prices were being driven by the decrease in international petroleum prices but they were offset by a weaker rand/US dollar exchange rate.
But the price of Brent crude oil dipped below the $100-mark per barrel for the second day in a row yesterday after closing strongly at $110 (R1809) per barrel on Friday.
The price of oil this year soared to its highest since 2008, climbing above $139 a barrel in March after Western countries imposed severe sanctions on Russia over its invasion of Ukraine.
Investec chief economist Annabel Bishop said domestic fuel prices could be reduced further next month as oil prices were down more than 20 percent from the June high.
“International oil and petroleum products prices have dropped from mid-June, with the Brent crude oil price at $99.70 per barrel from $123.60 per barrel in June,” Bishop said.
“Another petrol price cut is building for South Africa in September, of around R3.00 per litre, after the cut announced for August.”
The easing of global oil prices followed weak manufacturing data in major economies which highlighted the darkening global economic outlook.
The global economic downturn means a bleak outlook for fuel demand, and the latest economic indicators are pointing to a serious decline in global manufacturing output.
The US economy has entered a technical recession after contracting for the second consecutive quarter as it shrank by 0.9 percent in the three months to June.
The manufacturing Purchasing Managers’ Index (PMI) fell into contractionary territory in South Africa, falling to 47.6 points in July from 52.2 points in the prior month, its lowest in a year.
In the eurozone, the final manufacturing PMI recorded a drop to 49.8 points from 52.1 points in June while in the US it fell from 52.7 points to 52.2 points in the same period.
China and Japan’s manufacturing data also came in well below market expectations as new Covid-19 lockdowns in China continue to weigh on the country’s economic recovery.
ActivTrades senior analyst Ricardo Evangelista said there might be scope for further easing in oil prices as the markets digest the prospect of a reduction in demand, driven by the global economic slowdown and an increase in supply.
“The release of disappointing manufacturing data reinforced the view that a recession is looming on the horizon, a scenario that entails a drop in future demand for oil,” he said.
“At the same time, some observers believe that the Opec meeting being held (today) could result in the announcement of an increase in output during the month of September.”
Opec and its allies will today consider keeping oil output unchanged for September at a virtual meeting to decide on output policy for September.
Saudi Arabia is expected to push the Opec+ cartel to increase oil production at the August meeting following a request made by US President Joe Biden during his visit to the Middle East last month.