GLOBAL oil prices rose for the first time this week yesterday after entering bear market territory, although volatility could continue if Russia and Ukraine peace talks collapse.
The price of Brent crude oil traded just above the $100-mark (R1509) per barrel yesterday after falling 6.5 percent as investors’ cast doubt on the impact of growing pandemic restrictions in China on crude oil demand.
Brent crude prices are down more than 25 percent from their March 7 intraday high of $139 per barrel, reflecting easing fears of further supply disruptions based on cease-fire talks between Russia and Ukraine.
Neil Wilson, the chief market analyst for Markets.com, said one of the reasons why oil had reversed quite so sharply was that the market was seeing a chance for an armistice.
“Also the EU not following US/UK to outright ban Russian fossil fuels, that has been made very clear, albeit there are nods to working to wean Germany et al off the stuff,” Wilson said.
Ceasefire talks continued yesterday after both sides signalled progress on Tuesday, in spite of divergent views.
Moscow said Kyiv was not serious about finding a mutually acceptable settlement, but Kyiv was of the view that the Ukrainian and Russian positions were becoming more realistic.
However, the American Petroleum Institute (API) reported that crude oil inventories rose by 3.75 million barrels for the week ended March 11.
Russia, the third top producer of crude oil, also stated that it had written guarantees that it could allow a revival of the Iran nuclear deal to go forward.
High oil prices are seen as a positive for sub-Saharan African oil-producing countries such as Angola, but South Africa is mostly an importer of oil and thus will be negatively impacted.
Based on the current data, South Africa can expect record increases in the petrol price for April driven by the movement in international oil prices.
The price per litre of 95 octane petrol is set to increase by R2.15, while 93 octane could climb by R2.07, diesel by between R2.94 and R3.08, and illuminating paraffin by R2.51.
Automobile Association (AA) spokesperson Layton Beard yesterday said consumers should brace themselves for what could be a long winter if the conflict in Ukraine is drawn out.
Beard, however, said the current fuel price estimates were the mid-month outlook, and oil prices were, for the moment, see-sawing significantly.
“If realised at month end, these will be the biggest increases to fuel prices in South Africa’s history and will, undoubtedly, have major ramifications for all consumers and the economy in general,” Beard said.
Meanwhile, investors were on the lookout for US monetary policy tightening amid an elevated inflation outlook after consumer prices reached a 40-year high in February.
It was widely expected that the US Federal Reserve will hike interest rates for the first time since 2018, with the consensus pointing at a 25 basis points rise but soften later in the year.
“We expect the Fed to raise interest rates by 25 basis points,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management.
“In our central scenario, the moderation we anticipate in energy price inflation, alongside the resolution of pandemic-related supply disruptions as economies fully reopen, will help bring down inflation over the course of the year — albeit later than we previously expected.
“This should allow the Fed and other central banks to tighten policy steadily and gradually, in a manner that does not derail the economic recovery.”
BUSINESS REPORT ONLINE