South African motorists are facing another painful fuel price increase in October, even as Brent crude retreated from recent highs and the global oil market shows tentative signs of easing.
On Thursday, September 24, Brent crude was trading at $102.25 a barrel, while the rand was at R16.36 to the US dollar. The British pound was trading at R21.66, the euro at R18.62, while gold stood at $4,295.19.
For South Africa, the combination of elevated oil prices and a volatile rand remains a major risk to household finances and the broader inflation outlook.
It comes hot of the heels as the South African Reserve Bank (Sarb) announced an increase of 25-basis-points to the repurchase rate on Wednesday.
Dr Lerato Ntuli, economist at Anchor, said Brent crude had experienced significant volatility since the middle of the year, moving from around $70 a barrel to above $100 in July before reaching approximately $107 on September 15.
The sharp move higher followed drone strikes that forced Saudi Arabia to shut its East West pipeline, adding to concerns about global oil supply.
Following reports that the pipeline has resumed operations and there has been progress in engagements between the United States and Iran, Brent prices subsequently retreated below $100 a barrel on Wednesday morning briefly.
Ntuli said the recovery in supply remained incomplete, however, with the East West pipeline expected to take several weeks to return to full operations.
The Red Sea also remains a significant risk for global energy markets, with Houthi control of Yemen's Red Sea coast and the Bab al Mandeb strait continuing to create uncertainty for shipping.
Oil supply and demand under pressure
The International Energy Agency's September Oil Market Report forecasts global oil supply at 100.7 million barrels a day in 2026, down 5.7 million barrels a day from the previous year.
At the same time, global demand is expected to decline by 2.5 million barrels a day, which is 940,000 barrels a day more than the IEA had projected a month earlier.
Ntuli said this meant the supply deficit was being absorbed through weaker demand and inventory drawdowns rather than a substantial increase in new supply.
This dynamic has helped prevent oil prices from rising even further, but it also leaves the market vulnerable to another disruption.
The bigger concern could be refined fuel products rather than crude oil itself.
According to the IEA, net diesel and gasoil exports from the Gulf averaged about 390,000 barrels a day in August, roughly a quarter of pre war levels.
"Refinery activity is also recovering more slowly than crude oil flows. This creates an important distinction for consumers. Even if key shipping routes reopen and crude oil prices fall, the recovery in refined fuel supplies could take longer. This means relief at the petrol pump could lag behind any decline in Brent crude prices," Ntuli said.
Oil outlook remains highly uncertain
The outlook for oil prices remains finely balanced, with risks on both sides.
A reopening of the Strait of Hormuz could rapidly remove some of the geopolitical premium currently embedded in crude prices. Oil prices briefly fell towards $70 a barrel in July following a ceasefire agreement between the US and Iran and the subsequent resumption of oil flows.
However, renewed escalation in the Middle East or further attacks on Red Sea shipping could push prices sharply higher again.
"The market has limited alternative routing capacity, meaning another major disruption could have an immediate impact on global supply and prices. For South Africa, that uncertainty is particularly important because the October fuel price adjustment is already largely locked in," Ntuli said.
Central Energy Fund data points towards increases of more than R2 a litre for both petrol and diesel from October 7.
"However, if oil prices remain around current levels or continue to ease during October, the average price used for the next adjustment could fall substantially compared with September. September's calculation captured the sharp mid month oil price spike, meaning a sustained decline in Brent could provide some relief in subsequent months. Even so, fuel prices are expected to remain significantly higher than their pre war levels in the near term," Ntuli added.
Rand could determine the extent of relief
The other major variable for South African motorists is the rand.
The currency has recovered to around R16.25 against the dollar after weakening to approximately R16.40 last Wednesday following the United States Federal Reserve's rate hike.
The rand's performance is crucial because South Africa imports crude oil and pays for it in US dollars.
A stronger rand can offset some of the impact of higher international oil prices, while a weaker currency can amplify increases at the pump.
The Federal Reserve's outlook therefore remains important for South African fuel prices. With the US central bank signalling the possibility of another rate increase before the end of the year, renewed dollar strength could place pressure on the rand.
That could offset some of the benefit South Africa would otherwise receive from lower Brent crude prices.
For consumers already dealing with rising transport and living costs, the immediate outlook therefore remains challenging.
While Brent crude has pulled back from its September peak, the combination of constrained refined fuel supplies, geopolitical risks and currency movements means South African motorists should not expect an immediate return to cheaper fuel.
The direction of oil prices over the coming weeks will be closely watched, but for households and businesses, the October increase is already set to deliver another significant blow to transport costs.
ashley.lechman@nationalmg.co.za