Petrol and diesel prices in South Africa are expected to come down significantly in October, according to mid-month data published by the Central Energy Fund.

The group reports an over-recovery on fuel prices across the board, which if maintained throughout the rest of the month could see petrol prices drop by as much as 36 cents per litre, and 88 cents per litre for diesel.

These are the expected changes at mid-August:

• Petrol 95: 36 cents per litre decrease
• Petrol 93: 27 cents per litre decrease
• Diesel 0.05%: 85 cents per litre decrease
• Diesel 0.005%: 88 cents per litre decrease
• Illuminating paraffin: 82 cents per litre decrease

These adjustments are based on the continued decline in the price of international petroleum, as well as the stabilisation of the rand/dollar exchange rate at a lower level.

The rand has stabilised under R17.00 to the dollar, having been trapped in the R17.20 and R17.60 range for most of August. Prices have settled at around R16.60 to the dollar, as markets await guidance from major central banks.

The South African Reserve Bank’s Monetary Policy Committee will announce a decision on rates this week, which is likely to provide some direction – while the US Federal Reserve and the Bank of England are also expected to make announcements which could swing investor sentiment.

Exchange rate movements have contributed around 18 cents per litre to the over-recovery of fuel prices.

International petroleum prices have seen a gradual decline in September – the quantum of which is far greater for diesel products, hence the larger drop in price.

International products are moved by refinery costs for the various grades of fuel, and movements in oil prices, which have again dropped below $40 a barrel in recent sessions. International prices are down to $38 a barrel from around $44 a barrel in August.

The decline in oil price is being driven by concerns over demand as the world continues to grapple with the Covid-19 outbreak, and the fallout it has had on various industries – particularly in China.

There are also worries around an oversupply in the market, with major oil-producing regions lowering prices to support demand. Analysts note that a second wave of Covid-19 in major economies could see prices recovering to pre-pandemic levels only in 2021, with some predicting a surge to as high as $60 by the end of next year.

Movements in international fuel prices have contributed to a 9-18 cents per litre over-recovery for petrol, and 70 cents per litre for diesel.

The table below outlines how the price changes would be reflected at the pumps: