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Friday, June 14, 2024

Big June Fuel Price Cuts Now More Likely as Oil Hits 3-Month Low

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Significant cuts in petrol and diesel prices are expected at the start of June as Brent crude oil reaches its lowest level in three months.

The latest estimate from the Central Energy Fund (CEF) indicates that the price of 95 unleaded petrol is set to decrease by around 87c a litre, while the wholesale price of diesel could be lowered by between 87c and 92c a litre.

Illuminating paraffin could see a reduction of almost 78c.

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South African fuel prices are largely determined by international oil and fuel costs, as well as the rand exchange rate since oil is priced in dollars.

On Wednesday, Brent crude was trading at around $82 a barrel, down from close to $90 a month ago.

Bloomberg reports that rising oil inventories in the US and Europe are putting pressure on prices.

Additionally, a warm winter in the northern hemisphere has dampened fuel demand.

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Despite recent losses, Brent crude is still up 7% so far in 2024 due to instability in the oil-rich Middle East, drone strikes on Russian refineries, and OPEC+ supply cuts.

The group of oil-producing countries is set to meet on 1 June, where more supply curbs are expected.

International diesel prices are also under pressure due to the growing popularity of liquefied natural gas-powered trucks in China, according to Bloomberg.

Meanwhile, the rand is trading at its strongest level since the final quarter of 2023.

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On Wednesday, the rand was at R18.17/$, having gained almost 5% in a month. This is amid renewed optimism that US interest rates may be cut, alongside subsiding fears of an ANC-EFF coalition following the election and strength in commodity prices.

The final fuel prices for June will be set next week, with adjustments scheduled for the first Wednesday of the month.

At the beginning of May, petrol prices were hiked by 37c a litre, reaching levels last seen in October 2023, while diesel prices were cut to their lowest levels since February this year.

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