Economic strategist from Econometrix Treasury Management, Russell Lamberti, said on Thursday that with the rand price of crude oil averaging close to 10 percent lower week-on-week, a 30 cents per litre drop in the petrol price in August could be on the cards.

The July ULP 95 (Reef) petrol price would then dip from 1070 cents a litre to 1040.

Lamberti's oil price target by the end of July is $124.00/barrel.

He says the rand's move has meant that he has had to revise his petrol price forecasts steadily lower over the course of this month.

"A 30c/l drop in the petrol price in August and a 15-20c/l drop in diesel prices will come as a welcome reprieve from steadily rising petrol prices over the past year," says Lamberti.

He cautions against views that excessive speculation has been at play.

"That oil prices have retreated over $20/barrel from the highs of $147/barrell just earlier this month is being used by many commentators as proof that the oil price had been driven higher in recent months by excessive speculative activity. We continue to caution against holding this view, however. The US Interagency Task Force has found that futures traders have held as many short positions as long positions over the past year, and held net short positions for the first five months of 2008. The investigation also shows that speculative trades have actually followed oil price changes rather than preceded them," he says.

Lamberti says this does, however, highlight that the global oil market is fundamentally tight.

"It brings supply risks into sharp focus, with the threat of war in Iran still a big upside risk for energy prices. One also cannot ignore that Asian oil demand, led of course by China, is still steaming ahead despite some concerns about slowing Asian economies," he says.

This means investors should remain very cautious, but he says there are certainly signs of downside momentum.

"Our target of $124/barrel has just about been hit. We would therefore remain cautious at this level and await fresh direction. We believe a sustained break below $124 could target levels toward $112. The oil chart suggests that downside momentum is still intact," concludes Lamberti.

I-Net Bridge