JSE likely to be choppy as oil holds its gains

The JSE is likely to have a disparate session on Tuesday after the mixed session in Asia, where Japan’s Nikkei 225 tumbled 2% but Hong Kong’s Hang Seng index pushed higher.

The price of Brent crude held modest gains, after rising to its highest level since 2018, fuelling the spectre of higher consumer inflation on the global level.

Brent crude hovered at $81.42 a barrel in early trade, a day after oil cartel Opec and its allies stuck to their earlier plan to increase output by a modest 400,000 barrel a day in November.

“Opec+ was probably the biggest cause of volatility, as the grouping refused to bow to pressure from the US and India to pump more oil,” said Jeffrey Halley, senior market analyst at Oanda in a note. “Various reasons were promulgated including fears of fourth wave shutdown, a valid point, the rise in prices being a natural gas and coal issue, not oil.”

As a net importer of oil, SA is sensitive to higher oil prices, which have the potential to drive up consumer prices.

However, petrochemical giant Sasol has benefited handsomely from the surge in Brent crude, with the share price trading at its highest level since mid-January 2020. The value of the share price has doubled so far in 2021, though it is still way off its peak of more than R600 touched in 2014.

The rand was back above the psychological level of R15/$, reflecting the ebb and flow of investor sentiment.

SA’s currency has traded erratically since mid-August when markets started positioning themselves for the US Federal Reserve’s eventual reduction in its huge multibillion-dollar stimulus programme, which has been a pillar of strength for risk assets.

The rand was 0.22% weaker at R15.07/$ in early trade, but was still 9% stronger year on year.

Other commodity prices were marginally weaker on the day, with gold slipping 0.51% to $1,759.04oz.

mahlangua@businesslive.co.za