South Africa: Oil prices cause rand to drop by over 1%

Crude oil prices increased by more than 2% on Monday following new attacks on Saudi energy infrastructure and vessels in the Middle East. Brent crude was trading around $107 per barrel in the afternoon.

This increase particularly impacts South Africa, which imports crude oil and refined products. The South African government acknowledges that local fuel prices are directly influenced by international prices and import costs.

The pressure was not limited to the foreign exchange market. The Top 40 index of the Johannesburg Stock Exchange fell by about 1.3%, while the yield on the benchmark government bond maturing in 2035 rose to 8.8%.

The market is also awaiting the U.S. Federal Reserve’s monetary policy decision scheduled for Wednesday. A more hawkish tone from the Fed could further support the dollar and keep emerging market currencies under pressure.

Pretoria’s vulnerability to oil shocks is central to a strategic stock policy project published in July. The proposal stipulates that the South African National Petroleum Company maintain reserves equivalent to 60 days of net crude and refined product imports, with a long-term goal of 90 days.

Additionally, the South African government reminds that fuel prices are adjusted monthly based on local and international factors, including crude prices, imported petroleum products, and shipping costs.