JSE firms on higher oil prices

The JSE ended more than 3% firmer on Thursday as the rebound in oil prices continued. There was optimism in the market that with oil prices at historic lows, producers will continue to scale back on production to cope with a collapse in demand for fuel as the pandemic ravages economies.

The JSE ended more than 3% firmer on Thursday as the rebound in oil prices continued. Attention turned to an expected announcement by President Cyril Ramaphosa on Thursday night on the easing of lockdown measures.

There was optimism in the market that with oil prices at historic lows, producers will continue to scale back on production to cope with a collapse in demand for fuel as the coronavirus pandemic ravages the world’s economies, reported Reuters.

“Oil’s rebound continues as production cuts are being brought forward. Algeria and Kuwait have signalled they are cutting production immediately and this will likely be a recurring theme over the next week,” said Oanda senior analyst Edward

Moya. The production cuts by Opec+, which is the oil cartel and its partners, “are poised to start next month but others will probably cut earlier and deeper as tank tops are reached.

“Energy markets are preparing for a massive wave of shut-ins all over the globe,” Moya said.

A shut-in refers to the cutting down of output by a specific facility that has been working at 100% of its capacity.

Miners led the gains on the JSE, with most major indices in positive territory. The all share rose 3.1% to 49,601.82 points and the top 40 3.19%. Gold miners jumped 10.81%, the platinum index 9.57% and resources 6.24%. Banks and financial gained 1.48% and 1.63%, respectively.

Gold gained 0.93% to $1,729.34/oz and platinum 1.33% to $762.37. Brent crude jumped 8.2% to $22.44 a barrel.

The rand remained under pressure, weakening for a fourth successive day against the dollar, reaching an intraday low of R19.1786/$. At 5.54pm it had softened 0.11% to R19.0289/$, 0.12% to R20.5746/€ and 0.38% to R23.5303/£. The euro was little changed at $1.0811.

Analysts believe the rand is likely to remain volatile as a global risk-off mood persists.

NEW NORMAL

“What we know is that volatility will stay with us for a while and that is the kind of ‘new normal’ we need to deal with over the forthcoming weeks and possibly months,” said FXTM chief market strategist Hussein Sayed.

Ramaphosa was expected to announce the government’s decision regarding the national lockdown and provide guidance on the phased restarting of the economy.