JOHANNESBURG – A R1.50 a litre petrol price cut might be on the cards for December as the per barrel price of Brent crude oil tumbles from $86 per barrel (bbl) (R1 242/bbl) in October to the current $65.21/bbl, Investec economist Annabel Bishop said in an oil note yesterday.
Bishop said this had been indicated by the Central Energy Fund as recent fears of oversupply, particularly in combination with concerns over slower future global growth, have seen the oil price ease.
Anticipated lower future oil demand, along with rising stockpiles of crude oil, and production increases from Russia, the US and Saudi Arabia, had given rise to fears of excess supply.
“With an MPC meeting next week, the interest rate decision is set for November 22, the previous market expectations of a 25 basis points hike in the repo rate have waned somewhat, as concerns over higher oil prices faded. However, the South African Reserve Bank takes a range of variables and factors into its decision,” Bishop noted.
She observed that the oil price was likely to remain volatile but is not expected to exceed $85/bbl in the near term, although 2019 could see upward pressure again.
Adding that the rand remained at risk of further volatility, particularly in 2019, while the fourth quarter typically could be a period of strength for the domestic currency.
Bishop’s note said the US oil production had proved substantially greater than was anticipated, and the US Energy Information Administration recently forecast that “US crude oil production will average 10.9 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 12.1 million b/d in 2019".
The surge in US oil production, notably shale, is furthermore underpinning the rise in US stockpiles of oil.