Brent Crude Oil Rally

In the past week, Brent crude oil rallied as high as $77 a barrel in the wake of US president Donald Trump’s move to pull the US from the Iran nuclear agreement.

In the past week, Brent crude oil rallied as high as $77 a barrel in the wake of US president Donald Trump’s move to pull the US from the Iran nuclear agreement. Unless a new arrangement is made, sanctions will begin to be re-imposed on Iran in the next 90 to 180 days. Iran raised its production by over a million barrels a day when sanctions were lifted in early 2016. The US can certainly expect to lose a portion of that, which could push up fuel prices further. Iran’s regional rival Saudi Arabia indicated it would work with others to mitigate any potential supply shortages.

The US sanctions will also impact local consumers, as most of South Africa’s refineries are built to produce petroleum that originated in Iran. The price of fuel is expected to be negatively impacted by the actions of the US government.

On the positive side, the rand strengthened against the dollar to trade around R12.25 against the greenback. This will act as a shock absorber for higher oil prices.

The dollar also lost ground as the 10-year Treasuries slipped back after another probe above the 3% level. This came as the US reported a smaller-than-expected rise of the consumer price index. The CPI rose 0.2% in April, compared to March, while food and energy prices rose a scant 0.1%. The data suggest the US Federal Reserve will be able to maintain its gradual rate hikes.

Locally manufactured products fell 1.3% in March year-on-year, with sectors such as clothing and electronic items being hit hardest, sliding by over 10%. The declines in both manufacturing and mining figures do not bode well for GDP growth in the first quarter. Official figures are expected to be released by Statistics South Africa soon.

Despite the seemingly bad news, markets managed to close in the green, with the JSE’s all-share index closing nearly 1% higher for the week.

The rand will be closely watched this coming week, as a stronger currency could subdue possible inflation fears in the economy.


Regards

Johan Steyn

SECURITAS – Wealth Management















 

Market data provided by I-Net | News article provided by Securitas with 4D Wealth

Securitas Financial Group is a Registered Financial Services Provider (FSP) FSB license number 6536

Johan Steyn, RFP®, Cell. 082 680 9510, johan@securitas.co.za;  

Albert van der Linde, B.Com (US), B.Com (Hons)(UP), Cell. 076 087 3084, albert@securitas.co.za;

Hannes Bresler, CFP®, B.Com (Hons)(UJ), Pr.Tech Eng, Cell. 082 823 7973, hannes@securitas.co.za;