Global Economic Update: Oil Surges 3% On Strong US Economy, Tensions In Red Sea

Taiwo Adekeye, FMVA

January 26, 2024

Oil prices appreciated approximately by 3% on Thursday to settle at their highest since December after U.S. economic data showed greater growth in the last quarter and as tensions in the Red Sea kept disrupting global trade. Brent crude futures was up by 2.99% settling at $82.43 a barrel, while U.S. West Texas Intermediate crude surged by 3.02% to settle at $77.36

South Africa: South African Cen bank wants clarity on disinflation before rate cut

South Africa’s central bank maintained its key lending rate on Thursday as it is yet to see a clearer disinflation trend that would justify cutting rates. It was the fourth meeting in a row that the bank left its repo rate on hold at 8.25%. Inflation fell for a second month to 5.1% year on year in December from 5.5% in November, remaining within the central bank’s target range of 3%-6%.

Turkey: Turkey hikes rates to 45%

Turkey’s central bank completed its aggressive tightening cycle with a 250 basis point, interest rate hike to 45% on Thursday to bring about the desired disinflation. The bank has lifted its one-week repo rate by 3,650 basis points since June, when President Tayyip Erdogan appointed former U.S. banker Hafize Gaye Erkan as its governor to conduct a sharp pivot toward more orthodox policies. The central bank expects inflation to rise from near 65% last month to 70-75% in May, before dipping to about 36% by the end of this year as tighter monetary policy cools prices.

Russia:  Cheap Russian crude is boosting the demand for oil in Asia and Africa

Asia and Africa have substituted Europe as the top destinations for Russian crude oil exports since Moscow was sanctioned by Europeans on sales of energy products after its invasion of Ukraine in February 2022. Prior to the sanctions in mid-2022, Europe accounted for over 60% of Russia’s oil exports and provided Moscow with a lucrative income stream for oil that was supplied cheaply to major European consumption hubs via pipeline. However, the main Russian crude oil grade, Urals, has traded at a discount of more than $20 a barrel to Dated Brent crude since mid-2022, against an average discount of less than $2 a barrel in 2021.

China: China adds 12.44 mln urban jobs in 2023

China created 12.44 million new urban jobs last year, meeting its target, but more efforts are in place to increase employment amid uncertain economic conditions in 2024. The world’s second-biggest economy grew by 5.2% last year, meeting the government’s target, but it is burdened by a protracted property market downturn, weak consumer and business confidence, and mounting local government debt.