Bad turn for petrol price cuts in South Africa

South African motorists expecting a significant petrol price cut in February are likely to be disappointed as the projected decrease has halved in recent weeks. 

This is due to a surging oil price on the back of anticipated military action by the United States against Iran, which is likely to disrupt supply from the region. 

In particular, Iran is likely to try to close the Persian Gulf, through which over 20 million barrels of oil and petroleum products flow each day, in retaliation. 

The rand’s recent strength, with the currency dropping below R16 to the US dollar for the first time since 2022, has not been enough to mitigate the impact of rising oil prices. 

South Africa’s Central Energy Fund (CEF) tracks the fluctuations in international oil prices and the rand-dollar exchange rate to forecast the impact on petrol and diesel prices for the coming month. 

Its latest data indicates the following changes for February –

• Petrol 93 – decrease of 64 cents per litre
• Petrol 95 – decrease of 66 cents per litre
• Diesel 0.05% – decrease of 53 cents per litre
• Diesel 0.005% – decrease of 60 cents per litre

While this will still bring relief to South African motorists, it will not be as much as what was initially expected by the CEF at the beginning of January. 

The CEF initially forecasted cuts of over R1 per litre for both grades of petrol, with diesel prices set to come down by around R2 per litre. 

However, a surging oil price over the past week has dashed hopes of such cuts, with Brent Crude rising by 13.5% since the beginning of January. 

This has come on the back of increasing fears of disruptions to supplies from major oil producers, particularly Iran and countries that use the Persian Gulf to access the Indian Ocean. 

With US President Donald Trump instructing the US military to position assets in the region for a potential strike on Iranian military targets, traders fear this has the potential to disrupt supply through the Persian Gulf. 

Market concerns are primarily focused on how any fallout from an escalation in tensions could impact shipping through the Strait of Hormuz, a narrow passage separating Iran and the Arabian Peninsula. 

Tankers carrying crude and liquefied natural gas transit through the strait to deliver cargoes worldwide at a rate of about 20 million barrels per day. 

This has been coupled with efforts from the United States to crack down on the so-called “Shadow Fleet”, which sanctioned nations, such as Russia, Iran, and Venezuela, use to export their oil globally.

As a result, oil is set for its biggest monthly gain since 2002 despite widespread expectations for a record surplus in 2026. This was thought to put downward pressure on prices. 

The rand’s recent rally has not been enough to offset this rise, resulting in petrol and diesel price cuts being reduced throughout January. 

South Africa’s currency has started 2026 on the front foot against the US dollar, with it strengthening to below R16 to the greenback. 

The rand has benefited immensely from elevated global uncertainty, with the currency being boosted by rising precious metals prices. 

The soaring gold price forms part of an ongoing rally in commodity prices, particularly for precious metals, which has been boosting South Africa’s trade balance.

However, this strength has not been enough to offset the surging oil price. As a result, potential price cuts for petrol and diesel are smaller than initially expected.