Oil Prices Up 1%  On Significant US Storage Withdrawals

Taiwo Adekeye, FMVA

December 14, 2023

Oil prices increased by approximately 1% on Wednesday rebounding from a five-month low in the previous session. The uptrend was due to a bigger-than-expected weekly withdrawal from U.S. crude storage and on worries about the security of Middle East oil supplies after a tanker attack in the Red Sea. Petroleum prices continued to rise after the U.S. Federal Reserve said that it will maintain interest rates as anticipated and hinted that it might begin reducing borrowing costs in 2024. Brent futures rose by $1.02 to settle at $74.26 a barrel, while the U.S. West Texas Intermediate (WTI) crude rose by 86 cents to settle at $69.47.

South Africa: South Africa’s rand weakens on inflation statistics, with attention focused on the Fed

The ZAR slipped against the USD on Wednesday, with the currency facing pressure despite a decline in domestic inflation. The strength of the currency was put to the test ahead of the US Federal Reserve’s interest rate announcement. The rand was trading at 19.0350 against the dollar, about 0.5% weaker than its previous close. The nation’s benchmark 2030 government bond was stronger, with the yield down 2 basis points at 10.060%.

Uganda: Uganda shilling strengthened due to reduced FX demand from importer.

The decreasing demand for dollars from companies that import goods contributed to the strengthening of the Ugandan shilling on Wednesday. The shilling was quoted by the nation’s commercial banks at 3,785/$, down from the closing rate of 3,795/$ on Tuesday.

Kenya: Kenya hopes to reduce its deficit this year.

The government of the East African nation amended its budgetary projections for the 2023–2024 fiscal year to June 2024, citing a 1% rise in foreign debt repayments due to currency depreciation. Concerns over the government’s capacity to stabilize public debt were raised when the budget was altered and the fiscal deficit was raised from the original 4.4% of GDP to 5.5% of GDP. The nation is currently exploring options to reduce this from 5.5% to a minimum of 4.7%. Kenya’s central bank increased its benchmark lending rate last week by 200 basis points to the highest level in more than ten years, in an attempt to stabilize exchange rate.

Argentina: Argentina’s annual inflation rate hit 161%.

The shock of November’s unexpectedly high annual inflation rate of 161%, the highest monthly percentage of the year shows how difficult it will be for recently appointed President Javier Milei to steer the nation through its unstable economic seas. Inflation is expected to climb faster in the months ahead after Milei’s government devalued the peso more than 50% this week, in a bid to stabilize the economy. The monthly inflation rate rose from 8.3% in October to 12.8% in November.

Brazil: The central bank of Brazil lowers interest rates by 50 bps.

The central bank of Brazil slashed its benchmark interest rate by 50 basis points for the fourth consecutive time on Wednesday and gave a hint that it might continue to do so until its next meeting in January. Inflation in the 12 months ending in November decreased to 4.68%, staying within the central bank’s annual goal range of 1.75% to 4.75%.

Russia: Russia’s Q3′ GDP officially verified at 5.5%

Russia’s GDP grew by 5.5% in Q3′ compared to the same time in the previous year, when it decreased by 3.5%. Russia’s economy is expected to rebound this year after its GDP fell by 2.1% in 2022 as a result of broad sanctions the West placed on Russia for its invasion of Ukraine. Russia’s ability to avoid a Western-imposed cap on oil prices is contributing to the resurgence of economic growth amidst rising interest rates, inflation and labor shortages.