Global oil prices eased from a two-week high yesterday as the US dollar firmed and supply from Venezuela came back onstream, ignoring the lingering tensions in Israel and Gaza.
The price of Brent crude fell to below $91 (R1725) per barrel yesterday, giving back some gains from Wednesday in a likely technical correction, while investors continued to assess the supply outlook.
Oil prices rallied to two-week highs on Wednesday as an escalating turmoil in the Middle East stoked fears about disruptions to global supplies, and as the US reported a larger-than-expected inventory draw.
However, the market retreated slightly yesterday as OPEC+ showed no signs of supporting Iran’s call for an oil embargo on Israel.
The US also issued a six-month licence authorising transactions in Venezuela’s oil sector after Venezuelan administration and opposition leaders reached an agreement to ensure fair 2024 elections.
ActivTrades senior analyst Ricardo Evangelista said the stabilisation of oil prices could be seen as a case of "no news is good news”.
“The situation remains critical and continues to threaten to involve the Middle East in a wider conflict, a scenario that could disrupt the global supply of crude. But, so far, there has been no escalation, and the nerves of oil traders seem to have calmed,” Evangelista said.
“There has also been good news elsewhere, with the announcement that sanctions on Venezuelan oil exports will be relaxed, providing some relief to the supply-side pressures that have supported the recent price rises.”
However, the rand weakened again as it breached the R19 to the dollar mark on Wednesday, losing 0.4% to R19.08 by 4pm yesterday.
The rand has struggled to regain momentum towards strengthening as it is.
TreasuryONE currency strategist Andre Cilliers said the rand’s weakness was driven by risk aversion in the market.
“The rand fell victim to the global risk aversion, retreating 1.0% to close at R18.98. The local currency has failed several attempts to break below the 100-day moving average at R18.71, and we have now moved to the upper end of the recent range.
“Poor local retail sales data also did not help rand's cause. This morning the rand is slightly weaker at just above the R19.00 level as the dollar continues to firm further.”
Meanwhile, stocks on the JSE also fell for the third day in a row, led by losses at Mondi, whose share price fell 5.5% after its trading update showed that profit tumbled due to a double hit from subdued market demand in the third quarter of 2023, and lower average selling prices.
The JSE All Share Index fell to its weakest in more than a week, losing 0.9% to 71 371 points in intraday trade due to the prevailing risk-off sentiment in global markets due to ongoing tensions in the Middle East and uncertainty surrounding the trajectory of interest rates.
Investors were also awaiting for the US Federal Reserve Chair Jerome Powell's speech for any clues it may provide about the roadmap of the US central bank.