Big petrol price cuts on the cards for South Africa

South African motorists are set for significant relief in April as current forecasts point to cuts of nearly R1 per litre to the petrol price, with diesel also expected to have significant reductions. 

This is because the oil price has declined by over 7% in the past month, with additional supply coming from major producers and a potential slowdown in global economic growth. 

Meanwhile, the rand has held its own against the dollar since the beginning of 2024 and has strengthened by 1.7% against the greenback in the past month. 

The Central Energy Fund tracks these changes to forecast the expected changes to the price of petrol and diesel in South Africa for the coming month. 

Its data indicates the below changes for next week when fuel prices are adjusted in April –

• Petrol 93 – decrease of 85 cents per litre
• Petrol 95 – decrease of 98 cents per litre
• Diesel 0.05% – decrease of 86 cents per litre
• Diesel 0.005% – decrease of 87 cents per litre

Global oil prices have been steadily declining in recent weeks as fresh supply is expected to come online, while US President Donald Trump’s tariffs have sparked fears about a slowdown in economic growth. 

Towards the end of February, the Organisation for Petroleum Exporting Countries (OPEC) announced that it would relax some of its production cuts. 

The organisation’s eight members who were subject to voluntary extra output cuts will begin increasing production in April and are expected to add 2.2 million barrels a day of supply. 

This relaxation was only anticipated to come into effect in late 2025 and early 2026, but fears of declining market share pushed major Middle Eastern producers to increase production. 

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

OPEC’s extra supply has compounded the expected impacts of reduced sanctions on Russia as part of negotiations to bring peace to Ukraine. 

As this extra supply comes online, there are fears of lower demand as the global economy slows, particularly with the Chinese economy, which is concerning traders. 

At the end of February, Bloomberg reported that the world’s largest import of oil has asked its refineries to reduce their output. 

China’s already weakening economy is being put under increasing pressure from its trade war with the US, impacting its exports and local economic activity. 

While the oil price has declined, the rand holding its own versus the dollar has helped reduce the cost of importing the commodity into South Africa. 

Despite fears that the rand would fall off a cliff amid geopolitical tensions, the currency has held firm and continues to trade between R18/USD and R19/USD. 

Trump’s stated policies, such as tariffs, are expected to boost the dollar in the short term and weaken emerging market currencies, such as the rand. 

While this was the case from 5 November 2024, when Trump won the US election, until the end of January, investors have since shifted in an attempt to Trump-proof their investments amid rising volatility. 

Crucially, South Africa’s risk premium has reduced significantly since the country’s national elections in May 2024, encouraging investment in local fixed-income assets and boosting the rand.