Fuel likely to become more expensive in July as oil prices soar on Middle East tensions
International oil prices soared last week following Israel's attack on Iran.
Image: Spencer Platt / Getty Images via AFP
International oil prices soared past the $70 per barrel mark (R1,255) on Friday as Israel launched air strikes on Iran's nuclear assets, fuelling fears of full-blown war in the oil-rich region.
The price of Brent Crude oil rose more than 7% on the day, following an initial 13% spike, to close at $74.23.
This is significantly higher than the previous month's average of $63.95 that determined the current fuel price structure.
Although the latest data from the Central Energy Fund points to small price decreases of around 7 cents for 95 Unleaded petrol and 11 cents for 50ppm diesel, this is based on accumulated data from earlier in the month when oil prices were still low.
Should the current oil price trends persist until the end of this month, July's fuel price outlook will change rapidly for the worse, with increases of more than 30 cents certainly possible.
93 Unleaded petrol currently costs R21.24 per litre in Gauteng, with 95 ULP retailing at R21.35 inland and R20.55 at the coast.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said investors currently fear that a prolonged conflict between Israel and Iran could disrupt the latter's oil production. Iran currently produces between 4% and 5% of the world's fuel.
'Rising oil prices have broader implications that could both weigh on the global growth outlook and keep inflationary pressures higher for longer," Ryan told AFP.
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He said this could complicate the decision making of major central banks, which would ultimately have to choose between raising interest rates in order to curb inflation, or cut them to stimulate economic growth.
JP Morgan, is still predicting oil prices in the low-to-mid $60s for the remainder of this year, and around $60 in 2026. But the bank said the worst case scenario, in light of conflict in the Middle East, could see prices rising to between $120 and $130. This could occur in the case of the Strait of Hormuz being closed, through which 20% of the world's oil flows, OilPrice.com reported.
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