This archive report was first published on 7 January 2020.
January 7, 2020 - Oil prices have surged to a four-month high, with a barrel touching $70.74 (Sh7,144) amid escalating tensions between the US and Iran.
The increase in global oil prices comes as a result of the build-up in tensions involving the US, Iran, and Iraq following the killing of a top Iranian general by the US. This has led to concerns over disruptions to oil supply in the Middle East, which could lead to a rally in oil prices and hit oil importers such as Kenya hard.
According to Reuters, analysts from ING, a Dutch multinational banking and financial services corporation, have warned that the situation could lead to disruptions to oil supply in the Middle East. 'While clearly the latest developments put US assets in the region at risk, it also increases the risk of disruptions to oil supply in the Middle East, be it through the Iranians disrupting Strait of Hormuz oil flows, or through attacking energy infrastructure of US allies in the region,' said ING.
Kenya has in recent months reaped the dividend of low global oil prices, which has seen its balance of payment improve considerably. However, an increase in global prices of oil would mean the country needs more dollars to buy the critical input, a situation that is likely to put pressure on the shilling.
Export earnings in the third quarter of 2019 dropped to Sh147.7 billion compared to Sh152.1 billion in the same period in 2018. The value of imports during the period under review declined by 5.3 per cent to Sh147.5 billion compared to Sh152.1 billion in the same period in 2018.
