Best news for South Africa’s petrol prices in over three years

The price of oil has plunged to its lowest level in three years as concerns around global economic growth increase and oil producers up their output. 

In the past month, Brent Crude oil prices have plummeted 6.52% to $69.47 per barrel – a level last seen in November 2021. 

This should translate into lower fuel prices at the pump for South African motorists as the cost of importing the commodity comes down. 

The oil price has been under pressure over the past year as China’s weaker-than-expected economy has weighed on global economic growth.

As the largest importer of oil, Chinese demand is vital for oil producers and is closely linked to economic growth. 

This week, Bloomberg reported that China has pushed its oil refineries to reduce their output, indicating that demand from the world’s second-largest economy is slowing. 

China’s top refiner, Sinopec, believes that consumption of diesel and petrol has peaked in the country, forcing it to pivot into chemicals. 

This comes at the same time as the Organisation for Petroleum Exporting Countries (OPEC) announced that it would relax some of its output cuts. 

OPEC’s eight members that were subject to voluntary extra output cuts will begin increasing production in April, and they are planning to add 2.2 million barrels a day of extreme production. 

This relaxation was initially expected to occur later in 2025 and maybe even in 2026. However, fears among major oil producers of losing market share have prompted the shift. 

The relaxation of these output cuts has already impacted the oil price, with traders betting on the increased supply not having any demand. 

This impact was compounded by traders also betting on OPEC+ member Russia having some of its sanctions relaxed by the US as part of negotiations to end the war in Ukraine. 

The main driver of the decline in oil prices may also be the tariffs imposed by US President Donald Trump, which are expected to slow economic growth and thus hit oil demand. 

Trump has coupled these tariffs with a plan to greatly increase US oil production, adding further supply to a market with declining demand. 

US investment bank Morgan Stanley has cut its price forecast for Brent Crude, expecting it to trade in the $60s throughout the rest of the year. 

Oil inventories in the US have also risen sharply in the past few weeks to 3.61 million barrels, further indicating that demand is slowing even in the world’s largest economy. 

The other half of the petrol price equation for South Africans is the rand-dollar exchange rate, which can significantly impact the cost of importing commodities into the country. 

Despite fears of the rand falling off a cliff amid geopolitical tension and diplomatic pressure from the US, the currency has largely held its own in 2025. 

Nedbank chief economist Nicky Weimar recently explained that many of Trump’s stated policy actions are expected to boost the dollar in the short term. 

This will result in emerging market currencies, such as the rand, weakening as investors put their spare cash into dollar-based assets. 

Trump’s attacks on South Africa are also expected to gradually weaken the local currency as foreign investors look to ‘Trump-proof’ their investments.

However, the rand has held its own in 2025 so far and has not spiked to over R20 to the US dollar as some expected.

“The rand has weakened, but let me tell you, it has not fallen through the floor. It has not done anything crazy,” Weimar said. 

“It has just weakened a bit. It went from R17.50 to the dollar to trading between R18 and R19 to the greenback. So, it is weaker, but not that much weaker to be inflationary.” 

Weimar explained that this is largely due to the decreased risk premium attached to South African assets since the GNU was formed in June 2024.

“South Africa’s risk premium has come all the way down after the election. It has really been dramatic,” she said. 

“That is what has helped to strengthen the rand. That is what has helped to bring inflation down, and that is what has created the space for the interest rate cuts we have seen so far.” 

While this has held strong so far, it is highly dependent on what is presented in the Budget Speech on 12 March and whether the GNU holds. 

“If there is anything that suggests it is breaking, it will hurt the rand. But, so far, the risk premium has remained low even though its strength has been tested.”