Projected Increase in Petrol and Diesel Prices in November
Petrol and diesel prices are expected to rise in November due to escalating geopolitical tensions that are driving oil prices higher and bolstering the US dollar. This price increase would break a five-month streak of reductions for South African motorists and could contribute to rising inflation rates in the coming months.
Temporary Price Increases
Despite the projected hikes, analysts anticipate that these increases may be short-lived. Global demand for oil remains under pressure, and upcoming supply caps are likely to be lifted. Following Israel’s limited retaliation against Iran, which did not target oil facilities, oil prices experienced a notable drop on Monday morning.
November Price Adjustments
According to the Central Energy Fund, which tracks oil prices and the rand-dollar exchange rate, the expected price increases for November are as follows:
- Petrol 93: up 17 cents per litre
- Petrol 95: up 29 cents per litre
- Diesel 0.05%: up 22 cents per litre
- Diesel 0.005%: up 21 cents per litre
Fortunately, these increases are viewed as a brief interruption in a broader downward trend in fuel prices.
Global Oil Demand Outlook
The demand for oil from the world’s two largest consumers, the United States and China, is projected to weaken in the upcoming months. The Chinese economy, facing significant challenges, is unlikely to meet its GDP growth target of 5% this year, which could put additional downward pressure on oil prices.
As the largest fuel importer, China’s economic slowdown is expected to significantly affect global oil demand. This declining demand will be coupled with an increase in supply as the Organization of the Petroleum Exporting Countries (OPEC) begins to lift production caps. OPEC member states are concerned about losing market share to US producers and are unlikely to maintain production cuts that jeopardize their financial stability.
OPEC’s Potential Actions
Crucially, Saudi Arabia has expressed support for removing supply caps in December. OPEC will convene at the beginning of the month to discuss output for 2025. If OPEC fully unwinds its production cuts, over one million barrels of oil per day could re-enter the market, contributing to a downward trend in prices amid persistently low demand.
Immediate Market Reactions
In the immediate future, Israel’s restrained response to Iran did not impact oil facilities, resulting in a 4.5% drop in oil prices during Monday morning trading. This decline raises the possibility that petrol and diesel prices could decrease before the official November rates are announced.
Major American investment banks have recently lowered their Brent Crude price forecasts, noting minimal supply risks. However, the ongoing strength of the dollar, heightened geopolitical tensions, and the upcoming US election on November 5 could support the greenback. During times of global uncertainty, investors often seek safety in the dollar and US-based assets, which can negatively impact emerging market currencies like the rand.
Rand Performance and Future Outlook
Despite these challenges, the rand and South African assets have shown improved stability since the formation of the Government of National Unity (GNU). The rand has also benefited from the US Federal Reserve’s aggressive interest rate cuts, making local investments more attractive.
The accompanying graph from the Central Energy Fund illustrates the basic fuel price, closely tracking oil prices in rand terms.