(Business Insider South Africa)
(Business Insider South Africa)
  • Oil prices plummeted to a 21-year low overnight as uncertainty mounted around storage of excess supply.
  • The commodity has continued to fall over the past week, even after OPEC and its allies agreed to a historic production cut intended to backstop prices.
  • At this stage, South African petrol prices could fall by almost R2/litre in May.
  • For more stories, go to Business Insider's home page

Oil plunged to a 21-year low overnight. The commodity's latest round of sharp selling comes as uncertainty mounts around storage for excess oil. Demand for crude has plummeted since the coronavirus outbreak has frozen activity worldwide.

WTI crude oil plunged as much as 21% to $14.47 per barrel. It later pared losses and traded roughly 15% lower to $15.30 on Monday morning. Brent crude losses were muted by comparison, with the commodity sliding by 3% to $27.81 per barrel. 

The price of oil has continued to slide even after OPEC and its allies agreed to the biggest-ever production cut - one intended to backstop prices. Investors remain unconvinced the cuts can offset cratering demand for the commodity as the coronavirus keeps society from operating normally.

Concerns around storage come as near-term WTI crude prices trade at large discounts to longer-dated contracts. That dynamic is playing out amid worry that a key storage hub in the US is nearing capacity, according to Bloomberg.

The rand, currently trading at R18.71/$, fell by almost 4% since the start of the month, which would usually mean imported oil is more expensive. But the oil price slump has cancelled out the rand losses, and - at this stage - will ensure a deep cut in petrol and diesel prices.

According to the latest estimates from the Central Energy Fund, the price of 95 petrol could be lowered by more than R1.80 a litre in the first week of May, while 93 petrol will go down R1.73.

This will bring the price of 95 petrol in Gauteng to around R12.16 a litre, and 93 to R12.03.

In April, 93 unleaded petrol was cut by R1.76 while 95 unleaded petrol fell by R1.88.

Diesel prices look set for a cut of R1.15 to R1.20 a litre in the first week of May.

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