(Business Insider South Africa)
- After slumping below $17 in April, Brent oil is back to above $36 a barrel.
- While a stronger rand has so far helped to soften the blow, it probably won’t prevent a sizeable hike in the first week of July.
- At this stage, petrol looks set for an increase of more than R1.50.
- For more articles, go to www.BusinessInsider.co.za.
The rand price of Brent oil has climbed more than 80% from its weakest point in April, as the oil market recovers from its lowest levels in 21 years.
Working on the current oil and rand levels, the petrol price looks set for a hike of more than R1.50 a litre in the first week of July, the latest data from the Central Energy Fund shows. Diesel prices could be increased by more than R1.40.
The Gauteng petrol price (95) fell from R16.16 at the start of the year to R12.22 in May thanks to the oil price slump – before rising again to its current level of R13.40.
In April, oil plunged to a 21-year low after a slump in demand amid the coronavirus outbreak.
But after dipping below $17 a barrel in April, Brent is now trading around $36. Prices started to rally last month amid signs of an economic recovery worldwide and due to an extension of OPEC production cuts until July.
Rand strength has helped to soften the blow of the higher oil price. The rand strengthened to its best level since March this week, trading below R16.70/$ – a far cry from April, when it briefly reached R19.
But by late afternoon on Thursday, the currency weakened 3% in a single session, and almost reached R17 again amid a global sell-off.
Investors were unnerved by the US central bank’s grim economic outlook. On Wednesday, the Fed warned that the US economy could shrink by 6.5% this year and that the coronavirus pandemic’s impact will be felt for years.
The renewed local currency weakness pushed the Brent oil price in rand to almost R676 a barrel – from a low of R367 in April.
The Brent oil price in rand. Source: Johann Biermann/Bloomberg.
Compiled by Helena Wasserman
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