Another petrol price cut next month?

JANUARY 7, 2015

It's good times for motorists and consumers alike as global oil prices continue on a downward spiral – and observers believe the good times will continue with another anticipated price cut next month as oil prices look set on their downward trend.

Lehumo capital MD Maudi Lentsoane told EWN that; “We certainly are in a very good position to see a further decline in the petrol price.

“The big 'if' is if the rand has to behave. If we see a decline in the rand, it would counter some of those benefits we are seeing from the drop in the petrol price.”

The price of petrol decreased on Wednesday morning with the price of 93 octane dropping by R1.27 cents a litre while 95 octane dropped by R1.23 cents.

The price of diesel has dropped by R1.05 cents.

Global decline

Oil recovered from a 5% plunge on Tuesday, which saw prices touching fresh 5 ½ year lows in an over-supplied market – and oil supply shows no signs of abating with output in Russia hitting a record high in 2014 and exports from OPEC's second largest producer, Iraq, reaching its highest since 1980.

Brent crude gained 13 cents and was at $53.24 a barrel by 0226 GMT on Tuesday, after dropping to a low of $52.66 on Monday - it’s lowest since May 2009.

US crude was up 7 cents at $50.11 after slipping below $50 for the first time since April 2009.

Analysts have pointed out a number of factors as behind the plunge in oil prices including concerns about Greece, high output from Russia, Iraq and the United States and a stronger dollar.

Not all good news

While some economists expect cheaper oil to boost consumers' purchasing power and sustain the global economy, but the 50% plunge in oil prices since June has also raised deflationary fears.

Some see sees an emerging-market crisis developing in 2015, with liquidity being squeezed out of the market. Among emerging-market oil producers, Iran, Venezuela, Nigeria, Iraq and Russia have their budgets most at risk.