South Africa Anticipates Substantial Fuel Price Cuts in July Amid Global Oil Decline

South African motorists are set to enjoy significant fuel price reductions starting 1 July, driven by a sharp decline in global oil prices following a US-Iran peace deal that reopened the Strait of Hormuz. According to the latest Central Energy Fund data, 95-octane petrol could drop by approximately R1.44 per litre, while wholesale diesel with 0.005% sulphur may decrease by up to R3 per litre, and wholesale paraffin by about R5.13 per litre.

Brent crude fell from over $90 per barrel to below $80 after the US and Iran reached an interim peace deal, allowing oil tankers to exit via the Strait of Hormuz. This key waterway had been effectively closed since late February, causing oil prices to surge to $116 in April. The improved sentiment has led to strong over-recoveries, with petrol showing an over-recovery of around R2.80 per litre and diesel between R4.50 and R4.90 per litre.

However, the end of the general fuel levy relief, which has been in effect since April, will partially offset these savings. The levy relief removal will add back R1.50 per litre to petrol and nearly R2 to diesel. The rand's recent weakness against the dollar also influences fuel costs, with the currency trading at R16.45/USD on Monday, down from R16.30 at the start of June. Higher US interest rate expectations following a hawkish Federal Reserve meeting have strengthened the dollar, but lower global fuel prices are expected to cushion the impact.

The slate levy, which compensates fuel importers for losses, may also affect final prices. In June, a slate levy of R1.57 per litre was imposed after the slate account dropped to a negative balance of R18 billion in April. July's fuel prices will be officially announced by 30 June and take effect on 1 July. Current pump prices are at record highs, with 95-octane petrol at R28.06 per litre in Gauteng and R27.19 at the coast, while wholesale diesel with 0.05% sulphur is R27.93 per litre in Gauteng.