Rand slump may erase fuel price relief, analysts warn

Analysts have warned that the current rand weakness could cancel out potential fuel price cuts in May. According to unaudited mid-month fuel price data from the Central Energy Fund, both grades of petrol could decrease by between 9 and 13.5 cents.

This while diesel prices are set for a larger reduction of between 34 and 36 cents per litre, with illuminating paraffin possibly lowered by 26 cents.

A likely drop in demand driven by the trade war between the US and China saw Brent crude fall back to 63 dollars per barrel levels.

Chief Investment Officer at Makwe Fund Managers, Makwe Masilela, says further weakness in the local unit could change the outlook.

“The rand has just weakened. And as we’re talking about fuel prices now at $63 a barrel and looking at what the rand is flirting with, almost 20 to the dollar, that might be a problem going forward. Because we’re a net importer, you know, and as a net importer, if oil prices maybe go down by 2% as an example, but unfortunately, say your rand weakens by 4 or 5%. Then it is a zero-sum game. But now the most important thing is that you all need to see oil prices going down for all those good reasons, more production that will be coming through. But also you need a firmer, rand, because you’re a net importer, then that will make our lives much easier. And the numbers that they will be releasing or that they’ve just released now, it doesn’t consider what happened to the rand in the first two days or so.”