As the Russia-Ukraine tensions continue to escalate, Rand Merchant Bank (RMB) says oil prices are fast approaching triple digits.
According to a morning report dispatched by the investment bank, Brent crude rose 2.5 percent to US$97.77/bbl yesterday, extending the price spike to 26 percent in 2022. Despite this increase in oil prices, the bank’s economist Danie Kavishe says it is unlikely that OPEC+ members will see an increase in their supply schedule which will, in turn, keep oil prices elevated. The next OPEC+ meeting is scheduled for 2 March 2022.
Meanwhile, the Russia-Ukraine tensions have persisted, the latest developments now involving US President Joe Biden planning to speak to the situation in Ukraine. The US is likely to impose further measures after the European Union (EU) and the United Kingdom (UK) announced a first batch of sanctions aimed at Moscow. Russian President Vladimir Putin’s recognition of two self-proclaimed republics in eastern Ukraine caused a significant escalation of hostilities and has been seen as ending eight years of negotiations. Alongside these events, Russia’s upper chamber approved the deployment of soldiers in separatist-held areas.
Source: Bloomberg, RMB Markets
Regarding how this impacts his outlook on Nigeria, he noted that, although oil accounts for less than 10 percent of GDP, it is the biggest FX contributor and poses a risk to growth assumption. “Currently our full year GDP forecast for 2022 is 3.6 percent and already takes into account elevated oil prices which have more than compensated for the decline in production.”