JOHANNESBURG - Some up, some down – that's the picture for the month-end fuel price adjustment according to the Automobile Association (AA), which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund.
At mid-month, the AA is forecasting a slight decline of about one cent a litre for petrol, while diesel is set for a 20 cents-a-litre increase, with illuminating paraffin indicating a rise of 25 cents.
"After several weeks of stability, international oil prices have started to climb again, with a slight peak in the first week of May before a modest pullback. Although there is still a re-balancing of global supply and demand taking place in oil markets, the current variations are starting to more closely resemble the picture we saw before the COVID-19 pandemic. This suggests that normal market forces are increasingly gaining the upper hand over last year's disruptive gluts which led to astonishing sub-zero prices for West Texas Intermediate (WTI) oil." says the AA.
LOCKDOWN CAN CHANGE THINGS
The AA notes that oil prices are still vulnerable to lockdowns caused by resurgences of COVID-19, in particular new variants of the virus. "Nothing should be taken for granted until the global vaccination drive has surpassed the threshold needed for herd immunity," says the AA.
The AA says the Rand's surprising strength is helping to offset the oil price gains. "Although the daily exchange rate has been wildly variable, the average rate has seen the local currency gain around twenty cents against the US dollar since the start of May. This means a nett gain of around 11 cents against the dollar,” notes the Association.
The Association further notes that while the mid-month picture is indicating certain movements now, these are likely to change before the official adjusted price for June is announced by the Department of Mineral Resources and Energy later this month.
"The oil-versus-Rand see-saw will likely continue through the rest of May, and the month-end picture may be somewhat different to what's currently being seen," the AA concludes.