Petrol price relief is still on track

The biggest one-day rise in the oil price in more than a month has not derailed expectations of a hefty cut in the petrol price in December.

The biggest one-day rise in the oil price in more than a month has not derailed expectations of a hefty cut in the petrol price next month.

Brent crude rose as a much as 3% on Monday, but oil technically remains in a bear market and analysts expect plans by producers to cut output will not be in place by Christmas.

The oil price has eased about 15% in dollar terms since the beginning of October.

A stabilising rand has prompted some analysts to predict both falling fuel prices and possibly an interest rate cut in coming months.

The Central Energy Fund said on Monday that the overrecovery per litre of petrol so far in November based on the movement in the oil price and the rand was R1.50.

But this is based on Friday’s figures, said the Automobile Association’s Layton Beard. It is only halfway through November, but it still looks as if SA motorists could see a significant petrol price decrease in December, said Beard.

The price of unleaded 93 octane petrol has risen about 19% so far in 2018, putting pressure on consumers. Brent crude surged on Monday after Saudi Arabia said it would cut exports by 500,000 barrels a day next month, equal to 0.5% of global production.

The jump in the oil price, however, comes after global oil prices came under strain due to signs of rapidly rising US production, while the decision by the US to temporarily exempt several countries from Iranian sanctions has quelled fears of supply constraints.

Technically, oil is still in a bear market — defined as a 20% fall from its recent peak — said Oanda analyst Stephen Innes.

There is a supply glut, and it is unlikely Asia’s “unquenchable demand” for oil will dry up any time soon, said Innes.

Oil cartel Opec and its allies have proved in the past that they are capable of stabilising prices through production cuts.

“Nonetheless, the consumer will get an early Christmas gift at the pumps as the supply glut is expected to extend into year end,” said Innes.

As the JSE closed on Monday oil had pared its gains and was about 1.8% higher at $70.91, having still fallen 5.04% in November.

The rand has risen about 2.56% over the same period to R14.39 on Monday.