The South African retail petrol price is unlikely to see a sharp hike on September 3, as a virile rand has negated the effects of a stronger international oil price, which has risen by 7,7% since July 23, while the rand has strengthened by 6% over the same period from R7,6188/$ to today’s best level of 7,1900.
The retail petrol price is adjusted on the first Wednesday of each month in accordance with the previous averaging period’s over — or under-recovery. In August the retail petrol price was raised by 18 cents per litre (c/l).
Data published on Friday showed that there was still only a 2,566 c/l under-recovery in the unleaded petrol (ULP) price in South Africa on August 7, while for diesel 0,3% sulphur it was only 1,485 c/l.
The average over-recovery for the period July 28 to August 7 is higher at 8,419 c/l for ULP and 1,676 c/l for diesel 0,3% sulphur.
The June averaging period was for the period May 26 to June 25 and resulted in an average under-recovery of 31,215 c/l.
This, however, did not result in a retail price rise of similar magnitude, as the government terminated the Equalisation Fund in June, which meant there was an additional 10c/l available to smooth the price rise. In addition, one cent per litre was subtracted because the cumulative slate balance owed to the oil companies had a positive balance. Consequently, the retail petrol price rose by only 20c/l at the beginning of July.
Oil prices have been rising recently as the market focused on persistently low US crude oil stock levels and supply disruptions.
Overall US crude oil stocks are some 10% lower than a year ago, prompting warnings that any supply disruptions could send prices spiking higher.
Petrol (gasoline) stocks are crucial now as the US driving season lasts until Labour Day at the beginning of September, which is one of the reasons why the petrol price is likely to show a larger increase than the diesel price in September.
The trading focus is starting to shift to distillates, which become key during the Northern Hemisphere winter. Analysts have been drawing comparisons with 2000 when a heating oil shortage helped to drive prices above $37 a barrel for US crude oil.
The price of Organisation of Petroleum Exporting Countries’ (Opec) reference basket has been above the top of the cartel’s target range of $22-$28 a barrel for the past five trading days. The latest figure, for Thursday, was $29,07 a barrel for the basket, which is the average price of crude prices from seven nations, compared with $27,00 on July 23.
Set in 1986, the basket is based on the average prices of Algerian Saharan Blend, Indonesian Minas, Nigerian Bonny Light, Saudi Arabian Arab Light, Dubai Fateh, Venezuelan Tia Juana Light and Mexican Isthmus crude oils.
At its July 31 meeting Opec agreed to leave its output ceiling unchanged at 25,4-million barrels a day. The group meets again September 24 to reassess market conditions in the light of returning Iraqi crude exports.
Analysts believe Opec is unlikely to change output limits, especially as there is continued uncertainty over when Iraqi exports will flow back to the market in bigger, sustained volumes given the ongoing sabotage of pipelines in that country.
Postwar Iraqi crude output is running at about 800 000 barrels per day, far below the roughly 2,5-million barrels per day before the start of the conflict in March to oust Saddam Hussein.
Officials had hoped to resume exports of one million barrels per day by mid-July, but sabotage of Iraq’s oil infrastructure has delayed that timetable. – I-Net Bridge