Rand resilience and a declining oil price have set the scene for a further fuel price drop. This is according to the Automobile Association (AA), commenting on unaudited mid-month data released by the Central Energy Fund (CEF).
The current picture suggests that road users could be looking at a petrol price decline of between 60 and 64 cents a litre at month end, with diesel showing a 60 cents reduction and illuminating paraffin 57 cents.
“The Rand remained mostly stable against the US dollar in the first half of June, with strength in the currency contributing three cents a litre to the drop,” the AA says.
“The big move was from oil, which shrugged off OPEC’s production quotas to drop by around eight percent since the start of the month.”
The Association says the fuel price will come under pressure if the three major ratings agencies downgrade Rand-denominated debt to junk status in future reviews of South Africa’s sovereign credit ratings.
“That could trigger substantial capital outflow, almost certainly leading to Rand weakness which will be heavily negative for the fuel price,” the AA comments.
“Barring unexpected political or economic shocks in the lead-up to the next ratings reviews, we expect fuel price movements to mainly depend on international petroleum prices,” the Association concludes.