OIL and commodity prices edged higher yesterday, as a wave of risk aversion gripped financial markets amid geopolitical tensions concerning Ukraine and Russia.
The price of Brent rose to near eight year highs, hitting $96.16 (R1 454.56) per barrel yesterday morning, as the Russian/Ukraine geopolitical tensions caused increased supply concerns.
However, the Brent crude price eased later in the day, trading at $93.78 per barrel, when the JSE closed by 5pm.
The US has warned that Russia could invade Ukraine as early as Wednesday, and has evacuated all its diplomats and warned its citizens to leave the country.
These warnings drove a significant risk-off move by investors and flight to safe-haven assets, as fears of a Russian invasion of Ukraine grew imminent.
German Chancellor Olaf Scholz has flown to Kiev and Moscow in a bid to establish diplomatic talks to try to avert war.
Threats of oil supply challenges could also impact South Africa as an oil-importing country, raising the petrol price deeper beyond R20 per litre, and push consumer inflation above the top range of 6 percent.
The Automobile Association has called on the finance minister to announce a review of all the components of the fuel price in his Budget Speech next week, as a first step towards mitigating against rising fuel costs.
The Russian invasion of Ukraine could potentially trigger sanctions and disrupt energy flows in the region, creating supply-side constraints as OPEC+ struggles to meet output targets.
ActivTrades senior analyst Ricardo Evangelista said there was unease in the markets over the possibility of an imminent Russian invasion of Ukraine, and the impact such a development could have on an already tight market.
“A Russian move on Ukraine would be likely to push the price of the barrel well above the $100 a barrel mark, as Western sanctions would severely limit Russian oil and gas output, compounding the supply-side issues that have driven global energy prices up,” he said.
Amid all this uncertainty, Sasol's share price closed 4.07 percent higher at R339.31 yesterday. But gold mining counters were the biggest winners yesterday as the price of gold hit a threemonth high, rising to $1 867 per ounce.
Gold Fields jumped 10.96 percent to close at R184.44; AngloGold Ashanti was 8.33 percent higher to R323 per share, and Harmony Gold rose 6.36 percent to close at R58.35.
Investors are fleeing to gold as a safe haven asset to hedge against rising global inflation, and the potential impact of geopolitical tension.
However, equity markets fell as the JSE All Share Index weakened by 0.8 percent to 75 765 index points, while the rand strengthened 0.6 percent to R15.14 to the US dollar by 5pm.
The rand continues to perform well compared to other emerging market currencies, benefiting from the beginning of the year's seasonality with high bond yields and improving fiscal metrics still proving some attraction on South Africa.
Old Mutual Wealth investment strategist Izaak Odendaal said the rand was performing better than expected on the back of all the geopolitical tension dampening the markets.
“The rand has also been remarkably stable in the face of global market turmoil this year,” Odendaal said.
“Clearly bonds and the currency are helped by firm global commodity prices and the better fiscal outlook discussed above.”
BUSINESS REPORT ONLINE