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Oil prices are galloping towards the feared $100 per barrel mark

Oil prices galloped towards the feared $100 per barrel mark on Friday, rising to a seven-year high after a massive winter storm swept across the US and disrupted some oil production in the Permian Basin region. Photo: REUTERS/Nick Oxford

Oil prices galloped towards the feared $100 per barrel mark on Friday, rising to a seven-year high after a massive winter storm swept across the US and disrupted some oil production in the Permian Basin region. Photo: REUTERS/Nick Oxford

Published Feb 7, 2022

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OIL PRICES galloped towards the feared $100 per barrel mark on Friday, rising to a seven-year high after a massive winter storm swept across the US and disrupted some oil production in the Permian Basin region.

The price of Brent crude hit $93.33 (R1 440) per barrel early on Friday, extending its upward momentum to levels not seen since September 2014, before closing trade at $92.80 per barrel.

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Oil prices have been rising, with markets gripped by supply constraints since last month due to geopolitical tension between Russia and Ukraine, and between the United Arab Emirates and the Houthi rebels from Yemen.

The fund manager at Anchor Capital, Peter Little, said the threat of Russia invading Ukraine had left the markets shocked by the possibility of oil supply constraints.

“The geopolitical tensions surrounding the build-up of Russian troops on the border of Ukraine placed pressure on a tight global energy market, driving Brent crude oil and thermal coal prices higher,” Little said.

“Sasol and Thungela were the biggest local beneficiaries of spiking energy prices.”

Energy and chemical group Sasol ended trade on Friday 2.88 percent higher, to R350.28 per share, while thermal coal exporter Thungela Resources rose 3.19 percent, to R101.15 per share.

This also led the JSE All Share Index to regain ground and close 0.3 percent higher at 75 206 points on Friday, its highest since January 20, supported by commodity-linked sectors and tech stocks.

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However, the rand fell to a one-week low, easing by 0.15 percent to R15.47 against the US dollar, its lowest since January 28, amid heightened domestic risks due to continued scheduled power cuts.

South Africa's economy has been hit by energy shortages as power utility Eskom struggles to address long-standing operational and financial challenges.

Eskom's emergency programme to add generation from private producers has been experiencing multiple delays, and the energy crisis has shrunk capital investment into the country.

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Rising oil prices have also left South African consumers reeling from ballooning inflation on consumer goods and fuel prices, with the price of petrol breaching the R20 per litre mark again this month.

Bianca Botes, a director at Citadel Global, said though oil prices were fluctuating rapidly, the price of Brent crude remained within striking distance of the $90 level.

“Prices are being supported by steadily increasing demand and tight supply across major world producers,” Botes said. Meanwhile, Opec and its allies, led by Russia, stuck with their plan to release more barrels into a strengthening market gradually.

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