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Global oil prices remain elevated at 7-year highs

Global oil prices remained elevated at seven-year highs, driven by rising geopolitical tensions, which stoked fears of supply disruptions and saw investors looking for safe havens. Photo: REUTERS/Nick Oxford

Global oil prices remained elevated at seven-year highs, driven by rising geopolitical tensions, which stoked fears of supply disruptions and saw investors looking for safe havens. Photo: REUTERS/Nick Oxford

Published Jan 25, 2022

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GLOBAL oil prices remained elevated at seven-year highs, driven by rising geopolitical tensions, which stoked fears of supply disruptions and saw investors looking for safe havens.

The Brent crude price rose above the $88 a barrel mark early yesterday, briefly dipping below $87 (R1 313) in the afternoon, as the world’s biggest oil producers were seemingly on the verge of going to war. High oil prices could spell disaster for South African consumers as the price of petrol could rise back above the R20-mark a litre.

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Russia’s looming invasion of Ukraine took another step yesterday as the US ordered the departure of family members of staff at its Ukraine embassy, and the voluntary departure of employees.

The US is reportedly considering deploying several thousand troops to Nato allies in Eastern Europe and the Baltics and the EU has threatened Russia with severe economic sanctions if Moscow takes military action against Ukraine.

A Russian military intervention in eastern Ukraine could lead to increasing difficulties in the supply of energy as Russia is the world’s third-largest oil supplier after the US and Saudi Arabia.

Lombard Odier Bank chief investment officer Stéphane Monier said market uncertainty about possible additional sanctions, or conflict, was already visible as Brent crude oil had gained 10 percent to more than $88 a barrel.

Monier said if there were a conflict, emerging markets would be the first to feel the impact, as oil prices would immediately rise, potentially benefiting net exporters and damaging the economies of net importers. “This could also inflict a global supply shock, driving inflation from already high levels, and complicating central banks’ monetary policy decisions,” Monier said.

“Nevertheless, the conflict is more likely to play out economically than militarily, with Russia absorbing the threat of further limited financial sanctions in return for consolidating its existing 2014 position.”

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The United Arab Emirates also intercepted and destroyed two Houthi ballistic missiles targeting the Gulf country yesterday with no casualties following a deadly attack a week earlier.

Meanwhile, Opec+ continued to struggle to ramp up output.

The International Energy Agency said last week that Opec+ missed its production targets by 790 000 barrels a day in December as members such as West African producers Nigeria and Angola struggled to raise their production output.

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Meanwhile, with inflation remaining a worry, investors are awaiting this week’s US Federal Reserve meeting with some concern, fearing a further hawkish tilt by the American central bank, which, if confirmed, would be likely to create more downside for risk-related assets.

The rand was almost 1 percent lower trading around R15.29 against the US dollar, pulling away from a more than two-month high of R15.13 hit on Friday, as the dollar gained ground amid escalating geopolitical tensions.

The JSE All Share Index plunged to a one-month low, falling more than 3 percent to about 72 540 points yesterday, its lowest since December 28, as jittery investors dumped riskier assets.

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