AfricaPress-Tanzania: THE shilling is expected to be stressed further after holding relative steadily in the first quarter this year on the back of global oil raise after OPEC+ deal.
The local currency, according to money experts, expected to weaken due to increase demand after Organization of the Petroleum Exporting Countries (OPEC) and other members agreed to cut production to boost prices.
Orbit Securities said in its weekly market synopsis that OPEC+ reached an agreement to cut production in order to boost oil prices “This is expected to be stressed [the shilling] further by the rise in the price of oil,” the leading brokerage house in the country said adding: “If the deal holds the price of oil is expected to get back to above 45 USD a barrel despite a slump in demand due to a slowdown in factory activities worldwide.”
The shilling depreciated minute by 0.08 per cent to 2,301/79 against a US dollar since January from 2,299/97.
However, in weekly basis, the shilling maintained deceleration after losing 4 .0 point in percentage (pips) during the week.
Thus, the shilling closed the week at a weighted average exchange rate of 2,301/79 a green back.
Globally, Saudi Arabia and Russia ended their oil price war on Sunday by finalising a deal to make the biggest oil production cuts in history, following pressure from US President Donald Trump to support an energy sector ravaged by the coronavirus pandemic.
OPEC said it would cut 9.7million barrels a day in oil production in May and June, equivalent to almost 10 per cent of global supply, and continue with lower reductions until April 2022, in an effort to stabilise global crude markets. The cuts would be more than twice those made by the cartel during the global financial crisis.
Oil prices were volatile in reaction to the deal, with the price of Brent crude, the international benchmark, gaining as much as 8.0 per cent while West Texas Intermediate, the US benchmark, jumped as much as 8.7 per cent.
However, prices swung back on Monday with Brent trading 0.76 lower at USD31.24 and WTI up 0.44 per cent at USD 22.88 a barrel.
Oil prices remain about half their price in January, but recovered from 18-year lows of about USD20 after plans for deep cuts came to light two weeks ago.
