OPEC+ Successfully Attains Optimal Oil Price Level, Amid Fear Of Sustainability

Taiwo Adekeye, FMVA

April 5, 2024

It came as no surprise that a key summit of OPEC+ ministers decided to maintain the status quo on output policy, given that the global crude oil market is precisely in line with the exporter group’s preferences. Crude oil prices have surged in recent months, with benchmark Brent futures hitting a six-month high and coming within one cent of $90 a barrel during Wednesday’s trade. The conflict between Israel and Hamas, along with reduced production from OPEC+ and indications of increased demand, have all contributed to Brent crude’s rise from a low of $72.29 per barrel on December 13 to closing at $89.35 on Wednesday. The concern is that crude oil may exceed $90 per barrel and trend toward $100, potentially triggering a fresh wave of inflation in importing nations and impeding expected demand growth.

India: The rupee concludes at a historic low, with probable intervention from the RBI aiding in limiting losses.

The Indian rupee fell to its weakest closing level on record, pressured by dollar demand from importers, while likely intervention from the Reserve Bank of India helped curb the local unit’s losses. The rupee ended at 83.4375 against the U.S. dollar, marginally weaker than its close of 83.4350 in the previous session. The local unit fell to a record low of 83.4550 earlier in the session, likely prompting the RBI to intervene. State-run banks stepped in to sell dollars, likely on behalf of the RBI, when the rupee weakened past its previous historical low of 83.45. However, Elevated crude oil prices amid growing concerns about geopolitical disruptions to supply chains have also pressured the rupee in recent trading sessions.

South Africa: Consumer spending growth in South Africa steadied in 2023.

Consumer spending growth in South Africa stabilized in 2023 after the previous year’s post-pandemic surge, but expected interest rate cuts will encourage more purchases in 2024. consumers are under financial pressure as high interest rates increase the cost of debt and inflation pushes food prices higher. Spending on food, including groceries, takeout and dining out, increased in most South African cities, by an average of 8% in 2023 compared to a 16% increase the previous year. The country’s central bank stopped its tightening cycle in July for the first time since November 2021 and rates are expected to fall from the second half of this year.

Kenya:  Kenyan private sector activity slows in March, PMI shows.

Kenya’s private sector activity declined slightly in March, hurt by cashflow problems at some businesses. The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 49.7 in March from 51.3 the previous month. Readings above 50.0 indicate expansion, while those below indicates contraction. In February, it was the first instance since August that the figure had exceeded 50. Kenya’s shilling is up 19% against the dollar so far this year. The prices of fuel also fell in the latest regulator review for the month ending on April 14. However, Companies observed a decrease in input, purchasing, and output price pressures in March, attributed to further declines in fuel prices and a stronger shilling against the US dollar.

Nigeria: Monthly electricity subsidy spending to crash by 52%.

The Nigerian government’s most recent decision to revise electricity tariffs is expected to result in a 52% reduction in monthly subsidy costs. The decrease will lead to the current N261.2 billion amount dropping to approximately N125.94 billion, resulting in substantial monthly fiscal savings of around N135.26 billion. The central hub of Nigeria’s political influence, Abuja, hosts the largest concentration of high-end electricity consumers categorized under Band A, who will inevitably shoulder the impact of this cost adjustment.