Publish Date: 7 October 2022
Written By: Siphelele Dludla published in the Cape Times – Business Report
The price of petrol in South Africa could remain above R20 a litre for a prolonged period as the global oil supply is set to contract by a significant margin in November. This comes as Opec and its allies (Opec+) agreed on Wednesday to further tighten global crude supply.
0pec+ agreed to a deal to reduce oil production by about 2 million barrels per day beginning in November, the largest reduction since 2020, The move is designed to shore up a recovery in oil prices, which had fallen to roughly $80 (R1 420) a barrel from more than $120 per barrel three months ago.
As a direct result of the Opec+ decision, the price of Brent crude oil rose above $93 per barrel yesterday having rallied about l0% so far this week after starting the week at $89.16 per barrel.
Neil Wilson, the chief market analyst for Markets.com, said Brent spot prices had eased hack a touch from the 50-day line, but could still gain further towards the $100 mark per barrel,
“Opec and allies went ahead with a huge 2 million barrels per day (bpd) cut to quotas e in reality this amounts to Something like 700000 to 1 million bpd worth of actual barrels removed from the market,” Wilson said.
“As l have been saying here for some time, the price is not reflective of the fundamentals in the market and we could now look for a break to $100 as long as this rally holds.”
Morgan Stanley analysts concurred that Brent will find its way to $100 a barrel quicker than they estimated before after the move by Opec+.
Goldman Sachs has raised its forecast for global benchmark Brent Crude this fourth quarter by $10 to $110 per barrel, saying the developments on the supply side set the stage for what will be higher prices into the end of this year. This would deal a blow to South African motorists who saw fuel prices declining for three months in a row in October.
The price of 95 unleaded petrol fell by R1.02 a litre on Wednesday, While 93 petrol eased by 89 cents, lowering petrol prices in Gauteng to R23.36 litre from a record high of R26.14 in July.
Debt Rescue chief executive Neil Roets said the petrol price cut would make no real difference to the lives of most Citizens who have had to absorb massive fuel price hikes over the past year. “The only thing that will make a difference is a concerted effort by the major food retailers to bring down the price of basic foodstuffs,” he said.
Business Partners Limited’s financial director Rayna Dolphin said yesterday that the continued threats of load shedding and crime, coupled with the effects of the rising petrol price and interest rate hikes, have had knock-on effects on small businesses.
According to Business Partners, record high petrol prices saw 89% of SMEs surveyed feeling the crunch, confirming that the hikes directly affected their businesses.
“Aligning with a decline in confidence of growth over the next 12 months, when compared to the first quarter, the general outlook is generally negative but does have some areas of positivity, despite the many challenges that the sector faces,” Dolphin said.
”The local SME sector has had to weather a number of storms over the first two years. Despite having survived the worst of the pandemic, they continue to face global and local challenges.”