Mixed bag for June fuel prices as oil continues to battle the rand
Some up, some down — that’s the picture for the month-end fuel price adjustment, according to the Automobile Association (AA), which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund.
At mid-month, the AA is forecasting a slight decline of about 1c a litre for petrol, while diesel is set for a 20c a litre increase, and illuminating paraffin indicating a rise of 25c.
“After several weeks of stability, international oil prices have started to climb again, with a slight peak in the first week of May before a modest pull back. Although there is still a rebalancing of global supply and demand taking place in oil markets, the current variations are starting to more closely resemble the picture we saw before the Covid-19 pandemic. This suggests normal market forces are increasingly gaining the upper hand over last year’s disruptive gluts which led to astonishing sub-zero prices for West Texas Intermediate (WTI) oil,” said the AA.
However, the AA noted that oil prices are still vulnerable to lockdowns caused by resurgences of Covid-19, in particular new variants of the coronavirus.
“Nothing should be taken for granted until the global vaccination drive has surpassed the threshold needed for herd immunity,” said the AA.
The association said the Rand’s surprising strength is helping to offset the oil price gains.
“Although the daily exchange rate has been wildly variable, the average rate has seen the local currency gain around 20c against the US dollar since the start of May. This means a net gain of around 11c against the dollar,” said the AA.
The AA said while the mid-month picture is indicating certain movements, these are likely to change before the official adjusted price for June is announced by the mineral resources and energy department later this month.
“The oil versus rand seesaw will likely continue through the rest of May, and the month-end picture may be somewhat different to what is currently being seen.”