The drop is on expectation that supply will outpace demand.
Petrol prices in South Africa have risen to record highs of over R17 per litre. This following multiple petrol hikes and rising global oil prices.
But, good news may be on the horizon as oil prices dip.
Economist Elize Kruger says this is due to fears of a global over supply and moderating demand. She says that they were expecting an oil shortage two months ago after the US imposed sanctions on Iran.
“They are now the biggest producers of oil in the world – ahead of Saudi and Russia. There has been a lot of supply in the US and OPEC has upped their production in conjunction with moderating demand there is a scenario of over-supply.”
Kruger says this good news for South Africa.
“This as a drop in the fuel price could result in a drop in the inflation rate. She says inflation for December could go as low as 4.8% compared to the forecast 5.2%. That will result in the whole forecast curve moving lower into 2019. That will be positive when the MPC meet next week.”
Oil prices are likely to rally if OPEC and its partners decide to cut output.