Data from the Central Energy Fund (CEF) indicates that fuel price recoveries are building for a substantial cut at petrol stations next month should market conditions persist.
This is as data for the first of January points toward a large recovery for petrol and diesel, thanks to a stronger rand and pressure on global oil prices.
Petrol, as a result, is showing an over-recovery of around R1.20 per litre, and diesel is experiencing a significant recovery of around R1.75 per litre.
Below are the recoveries recorded for the beginning of January.
- Petrol 93: decrease of R1.09 per litre
- Petrol 95: decrease of R1.15 per litre
- Diesel 0.05% (wholesale): decrease of R1.49 per litre
- Diesel 0.005% (wholesale): decrease of R1.63 per litre
- Illuminating paraffin: decrease of R1.28 per litre
However, while it’s far too soon to make a conclusive prediction about the fuel price changes in February, this does provide a solid indication of a potential trend.
This is as it highlights what would need to happen to impact this positive trend.
With such large over-recovery rates, oil prices would have to rise, or the rand would have to weaken substantially to reverse the trend to an under-recovery and price increases rather than cuts.
Thankfully, there are no indications that either of these will happen, as both the oil trade and the rand-dollar exchange are expected to remain in beneficial territories.
Should these conditions persist, South African motorists will start the year off strong with fuel prices already being cut.
From Wednesday, 7 January, petrol prices were cut by between 62 and 66 cents per litre, while diesel prices were cut by between R1.37 and R1.50 per litre.
That said, it’s best to keep in mind that there are still three more weeks until an official announcement, and history has shown that present circumstances can change very quickly within such a short span of time.
Rand and oil conditions
This over-recovery is largely due to the movement of international product prices, driven by global oil prices, which add close to R1 to the numbers.
Oil prices have also come under pressure due to the United States’ attack on Venezuela.
An influx of Venezuelan oil led to oil prices heading to below $58 a barrel earlier this month.
However, this was upended by US threats against Iran and pressure on Russia, which applied pressure to supply-side pricing, resulting in an elevated oil price of over $62 a barrel.
That said, in the long term, analysts and forecasts predict a glut in 2026, which may lead to oil prices reaching $50 per barrel.
“Crude remains caught in a complex dance between heightened geopolitical risk and rising inventory,” said Robert Rennie, the head of commodity research at Westpac Banking Corp.
Higher Venezuela flows and rising output elsewhere could see prices trading in the $50s through the first quarter, he added.
The other factor to consider is the rand-dollar exchange rate, which is currently contributing 21 cents per litre to the over-recovery.
The rand has remained strong in recent months, delivering its biggest gains in over a decade and gaining nearly 13% against the dollar at the end of 2025.
While much of the rand’s strength is due to the dollar’s weakness, markets have been drawn to emerging economies and have taken a particular shine to South Africa.
South Africa’s risk-sensitive currency is also likely to benefit from its exposure to precious metal prices and comparatively lower near-term political risk compared to its peers, which face elections in 2026.
That said, South Africa’s fundamentals remain vulnerable, with weak growth, high unemployment, and many other issues hampering reform.
Loading ...
