Not good News for April’s Gas Prices

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The forecast for fuel costs in South Africa is still uncertain; while diesel prices are expected to decline, gasoline prices are still expected to rise in April.

The Central Energy Fund’s most recent data for the end of the third week of March indicates that while diesel prices have overrecovered by around 32 cents per litre, gasoline prices have underrecovered by about 18 cents per litre, which is somewhat higher than last week.

Even while gas costs are still expected to rise, it’s important to remember that they have drastically decreased from forecasts at the beginning of the month, when prices were expected to rise by R1.00.

Due to a stronger rand than it was last month and a lower oil price in rand terms, there has been a decrease in under-recoveries and a shift toward over-recovery for diesel.

If these recoveries continue through the end of the month, it should offer some respite to diesel-using drivers and other companies that depend on diesel for their operations.

This could also result in at least a slight decrease in inflation, as increases in fuel prices in February caused the inflation rate to come in higher than anticipated at 5.6%.
Annabel Bishop, chief economist at Investec, claims that since February, when gasoline prices and the cost of operating private vehicles increased by 75 cents per litre, inflation has been restrained.

“The price of gasoline increased by R1.21/litre in March, which is expected to significantly drive up inflation in that month. In general, fuel prices have increased the volatility of inflation estimates, according to her.

“As the price of Brent crude oil has decreased in rands internationally, April is now expected to see only a slight increase in gas prices.”

Nedbank economists concurred, predicting a rise in prices in April.
The bank stated, “Gains in global oil prices have countered the minor appreciation of the currency rate, indicating to significant fuel price hikes in April. Petrol prices jumped by 5.2% mom and 6.5% yoy in March.

The rand’s manipulation this week is undermining hopes for a better outcome for gas prices.

The rand has recovered above R19 to the dollar (it is now trading at R19.01) on sentiment that suggests interest rates will continue to rise globally for an extended period of time.

Although the US Federal Reserve maintains that rate cuts are imminent, as of right now, markets are only factoring in a decrease in the second half of the year. This means local delays for South Africa, where analysts predict a move in July or September.
Oil prices, meanwhile, have broken out of the narrow trading range seen for most of the year and pushed higher to above $85 a barrel.

According to Bloomberg analysis, despite weakening in recent sessions, crude oil has still advanced overall in the first quarter.

The range break has come as a result of US inventory drawdowns, OPEC+’s production cuts and as Ukrainian attacks on Russian territory, including against refineries, intensified.

“However, gains have been limited by surging supply from outside the group and a muddled economic outlook in top importer China,” Bloomberg said.

Despite the various influences, the analysts said that oil markets have been relatively calm, and are expected to remain so going forward, with only small bouts of volatility anticipated.

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