Big falls in fuel prices in June now look likely as oil hits three-month low

Gasoline and diesel prices are currently on track for significant cuts in early June as Brent crude hits three-month lows.

The latest Central Energy Fund (CEF) estimate shows the price of unleaded 95 petrol is due for a fall of around 87c per litre, while the wholesale price of diesel could fall by between 87c and 92c per litre.

Illuminating paraffin could be reduced by almost 78c.

Fuel prices in South Africa are largely determined by international oil and fuel costs and the rand exchange rate, as oil is priced in dollars.

On Wednesday, Brent was trading at around $82 a barrel – down from nearly $90 a month ago.

Bloomberg reports that oil inventories in the US and Europe are rising, putting pressure on prices. A warm winter in the Northern Hemisphere has dampened demand for fuel.

Still, despite recent losses, Brent is up 7% so far in 2024 amid instability in the oil-rich Middle East and drone strikes on Russian refineries – along with OPEC+ supply cuts. The group of oil-producing countries meets on June 1 and more restrictions are expected.

International diesel prices are also under pressure amid the growing popularity of LNG-powered trucks in China, Bloomberg reported.

Meanwhile, the rand is trading at its strongest level since the last quarter of 2023. On Wednesday, the rand was at R18.17/$. So far, the local currency has gained nearly 5% in a month amid renewed optimism that US interest rates could be cut, along with easing fears of an ANC-EFF coalition following the election and strength in commodity prices.

Final fuel prices for June will be set next week. Fuel prices will be adjusted on the first Wednesday of June.

Earlier this month, petrol prices rose by 37c per liter – reaching levels last seen in October 2023. Diesel prices were cut to their lowest levels since February this year.