Brent Crude Futures Decline Amid Easing Middle East Concerns and U.S. Job Growth

Oil prices experienced a decline on Friday as concerns about Middle East supply eased amid the Israel-Hamas conflict and speculation arose around the US Federal Reserve possibly pausing interest rate hikes. Brent crude futures were reported at $84.89 per barrel, while West Texas Intermediate crude was at $80.51 per barrel, reflecting a weekly decrease of more than 6%. Despite warnings from Hezbollah leader Sayyed Hassan Nasrallah about potential broader conflict near Lebanon’s border with Israel, the markets appeared resilient. John Kilduff from Again Capital LLC noted that the ongoing conflict is unlikely to majorly disrupt demand or supply.

The softer-than-expected job growth in the US for October, coupled with moderated wage inflation, pointed to a weaker labor market, suggesting less necessity for further Fed rate increases. Additionally, the Bank of England kept its interest rates at a 15-year high, encouraging a measure of risk-taking among investors. In China, services activity showed only slight growth in October, with sales increasing at their slowest pace in ten months and employment stagnating due to lower business confidence.

In South Africa, forecasts from the World Bank indicate that, barring geopolitical tensions, fuel prices are expected to remain stable during the festive season. This outlook is based on an anticipated average global oil price of $90 per barrel in the final quarter of the year, influenced by a decline in Brent crude prices from $91.86 to $88.72 per barrel, attributed to slower global economic growth and heightened production from non-OPEC+ countries.

The recent minor reduction of R1.78 per liter in petrol prices, driven by rising global oil inventories and the easing of US sanctions on Venezuela, is predicted to benefit both logistics and retail prices. However, consumers see this decrease as insufficient in light of current prices of R23.90 per liter for 95 unleaded petrol and R23.44 for 93 unleaded petrol.

The Absa Purchasing Managers’ Index, recorded at 45.4 points in October, highlights depressed demand for local goods due to high food and fuel prices, with the AA forecasting that the fuel price dip could last through the festive period. This follows a price break in July 2023 and an inflation rate of 8.1% for food, as reported by Stats SA, along with a R5.71 increase in diesel prices since June, currently priced at $87.25.

Gavin Kelly, CEO of the Road Freight Association, remarked on the delayed logistics impact resulting from warehouse reserves, while Neil Roets, CEO of Debt Rescue, emphasized that rising living costs are leading to financial instability. UASA spokesperson Abigail Moyo advised consumers to exercise caution in their spending due to elevated fuel prices affecting travel and upcoming educational expenses.

Despite enduring high living costs for South Africans—including surging electricity and food prices, persistent interest rate increases, and ongoing petrol price hikes—the anticipated stability in fuel prices offers some temporary relief. Experts recommend careful planning for travel during the festive season in light of the financial challenges expected at the start of the new year.