Why petrol, diesel prices are on track for large cuts next month | Fin24

• The price of 95 unleaded petrol could be lowered by around R2.60 a litre in the first week of September. 
• This will be thanks to a sharp slump in oil prices, while the rand has gained ground.
• Oil prices are under pressure amid concern about the Chinese economy, and reports that the Iran nuclear deal could be revived, which will add 2.5 million barrels to the market every day.
• Get the biggest business stories emailed to you every weekday, or go to the Fin24 front page.

After a grim few months, South African motorists will probably
get substantial relief next month – if the oil price and rand-dollar exchange
rate don’t weaken from current levels. 

According to the latest data from the Central Energy Fund, the
price of 95 unleaded petrol is expected to fall by around R2.60 a litre in the
first week of September. The price of 93 petrol could drop by around R2.45 a
litre. Diesel could be reduced by more than R2.30

The price of illuminating paraffin is on track to fall by
almost R2 a litre. 

“The expected decreases are good news for consumers who have been battered
and bruised by these prices the past six months. With these expected decreases,
the price of 95ULP will dip below R23/l and the price of 93ULP will cost just
more than R22.50/l. While fuel is still more expensive now than it was at the
beginning of the year, these forecast decreases do offer some relief,” says the
Automobile Association.

The AA says while these figures are promising, it must be remembered that
this is only mid-month data and that the picture may change come month-end
before the adjustments for September are made. 

The fuel prices are usually adjusted on the first Wednesday of a month,
and determined by the price of oil and the rand-dollar exchange rate.

After hitting a high of $123 in March, following Russia’s
invasion of Ukraine, oil prices have slumped. On Monday, Brent crude oil
dropped almost 5% to $93.46 per barrel – around its lowest levels in six months.

AFP reported that the weakness was due to new data that showed
a slowing China’s economic recovery.

China’s central bank slashed key interest rates in a surprise
move on Monday as a raft of data showed weakness in the world’s second-largest
economy.

Beijing’s rigid adherence to a zero-Covid-19 strategy has held
back economic recovery as snap lockdowns and long quarantines batter business
activity and a recovery in consumption.

Meanwhile, Iran’s foreign minister said Tehran will deliver its “final” proposal later Monday on talks to revive its 2015 nuclear accord with world powers, after Washington had accepted key demands.

A deal would mean that Iran’s crude output of 2.5 million barrels per day would no longer be under international sanctions and help relieve supply constraints that have been pushing up prices.

The rand was last at R16.41 after crashed through R17 to the
dollar last month. The dollar has retreated after the US economy shrank, and
inflation data came in cooler than expected. This fuelled speculation that the Federal Reserve will not raise rates as
high as previously expected. Higher rates in the US are negative for the
rand, which then earn comparatively lower interest.