Financial analysts this week warned against the threat of┬ádark clouds┬áof┬ácrude oil price spikes that are being┬ádriven┬áby the┬áglobal economic recovery.
Crude for February delivery increased as much as┬áUS $1.95 to US $89.98 a barrel in electronic trading on the New York Mercantile Exchange on Monday. It was at $88.87 a barrel in Singapore in the afternoon.
The contract fell 3.7 percent last week, the most in seven weeks. Futures gained 15 percent in 2010.
The latest figures are the┬ásecond highest since┬á2008 when it reached┬áa record high of US $148 per barrel before it was dampened by the worst┬áglobal economic recession┬ásince the Great War. This is third most significant increase to affect the global economy since 1970 when the world first experienced the highest crude oil prices┬áat US $ 70 per barrel.
Botswana’s main trading partner, South Africa, adjusted its pump prices last week by 29 cents per liter.
“The prices are being driven by the bullish outlook that we┬áare likely to see some┬áeconomic recovery rather than some supply constraints,” head of Capital Assets Management, Leutlwetse Tumelo, said.
“The implication of that would translate into an increase in pump prices which will mean that retailers and manufacturers┬áwill have no choice but increase prices,” he added.
The move is likely to┬á put Bank of Botswana┬á attempts to control inflation┬á on a back foot┬á at a time when it was expecting the 12 percent┬á Value Added Tax (VAT)┬á to be falling out of calculations.
According to November Consumer Price Index (CPI) inflation stood at 7.2 percent- one of the lowest during the yesteryear.
The outlook further┬áreinforces business community’s sentiments expressed in the recent Business Expectation Survey where a significant percentage of respondents “doubted” the┬áCentral Bank’s competence in reining in inflation to its target range.
The Central Bank has given itself a target range of┬áthree-to- six percent inflation target which it has rarely achieved. It is expected that it┬áwill reinstate its believe of containing inflation┬áwithin┬áthat range┬áwhen it announces its┬áMonetary Policy Statement┬áearly next month.
The respondents on the Bank of Botswana survey clamoured for “prudential measures” as exchange ratesÔÇöespecially the Pula┬áand Rand┬áare moving towards parity.
“The United States, China and Europe have seen economic recovery gaining momentum. There are positive economic indicators more than expected. This will exert pressure on fuel prices as fuel demands grow. What is happening in the international scene will affect South Africa and us,”┬áa Research Analyst at Motswedi Securities, Karabo Tladi, has said.
China’s crude imports in 2010 climbed to 239.3 million metric tons, according to the Beijing-based General Administration of Customs. That’s about 4.8 million barrels a day. December imports declined to 20.86 million tons from 20.9 million the month before.
Brent crude for February settlement rose as much as US $1.37, or 1.5 percent, to $94.70 a barrel on the London-based ICE Futures Europe exchange on Monday. On┬áFriday,┬áit decreased US $1.19, or 1.3 percent, to US $93.33. The more actively traded March contract was at US $93.75.