The Analysts of Taking Stock with Kalilah Reynolds say local companies that do business in oil are indirectly benefiting from rising oil prices caused by Russia’s invasion of Ukraine.

Russia is the world’s third-largest oil producer and second-biggest producer of natural gas. 

As of Friday, March 4, the global West Texas Intermediate benchmark for oil prices was US$109.30, while Brent Crude was at US$112.30 per barrel. 

“Even in Jamaica, you see companies like FESCO going higher and higher [in stock price] because investors are thinking, well, let me find some oil related company in Jamaica,” Keisha Bailey, CEO of Profit Jumpstarter said. 

FESCO’s stock price has soared 62% since the Russian invasion began on February 24.  The stock ended Friday’s trading at $7.92, up 890% from its IPO price of $0.80 less than a year ago.

This means $100,000 invested in FESCO’s IPO in March 2021 would now be worth $990,000. A $10,000 IPO buy-in would be worth $99,000 today. While even a $5000 purchase would already be $49,500.

Meanwhile, Bailey noted that investors in the American markets were dumping their equity investments in favour of “safer” investments, such as bonds.

This has led to increased volatility in stock markets. 

“Before there was a lot of panic in the market about higher interest rates and higher inflation and what it would look like in terms of potential for companies and their growth,” Bailey explained.

“Now we’re having gloom because we have a lot of people dying, we have sanctions escalating by the day against Russia and the Russian Government is not backing down,” she said.

She noted that the uncertainty is driving up the oil prices.

“The thinking is now that, with Russia now heavily involved in conflict, American oil- WTI, is safer and investors have been buying up US oil and oil is now above US$100 per barrel,” Bailey explained.  

She said that while oil investors have been benefiting, other industries are struggling.

“Of course, there are always opportunities to make money during these types of markets, it’s just more challenging. We have oil doing well, we have gold doing well but on the flip side a lot of these tech companies that everyone knows and loves, those are under a lot of pressure,” she said. 

Despite the rising prices locally and internationally, the analysts said that it is not all doom and gloom.

Bailey noted that President of the United States, Joe Biden, has announced that the US will be tapping into its emergency oil reserves to increase supply in the market. She said this should temper oil prices as demands can be met.

Expect travel cut backs

Meanwhile, Investment Research and Sovereign Risk Analyst at JMMB Group, Leovaughni Dillion  also urged calm.

He said that as oil prices move higher and higher, the demand will eventually fall.

“What’s gonna happen is that people are going to find ways to cut back. So, there’s an automatic kind of  gauge that’s in the system to kind of regulate it,” he pointed out.

“So, while you’re seeing the spike now and a lot of the spike is speculation and uncertainty, the actual demand side of it just won’t be there,” he added.

Bailey seconded this point noting that currently, no sanctions have been issued by world powers that will affect Russia’s oil production or exportation. 

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