Economy
Oil Slides 4% as Demand Worries Outweigh Supply Disruptions
By Adedapo Adesanya
Oil prices shed most of their recent gains on Thursday as a new round of coronavirus restrictions in Europe revived demand worries, overlooking efforts to move a stranded container ship blocking crude oil carriers in the Suez Canal.
As a result, the Brent crude fell by 4.01 per cent or $2.58 to trade at $61.83 per barrel while the West Texas Intermediate (WTI) slid by 4.28 per cent or $2.62 to sell at $58.56 per barrel.
Both contracts jumped about 5 per cent on Wednesday after a large ship called the EverGreen ran aground in the Suez Canal, one of the world’s most important oil shipping routes.
The Suez Canal Authority said on Thursday it had suspended movement temporarily while eight tugs work to free the vessel. The technical manager of the ship said another effort to re-float the vessel will be undertaken and this might take weeks.
The impact of the Suez Canal blockade on oil prices is also limited as the destination of most oil tankers is Europe, but European demand is currently weak due to a new round of lockdowns. Europe is continuing to struggle with the virus amid the third wave of COVID-19 infections and ramping up of lockdown measures.
This is worsened by its slow vaccination rollout affected by manufacturing issues and supply snags, to the extent that European Union leaders may introduce vaccine export bans.
It comes as a handful of countries re-introduce lockdowns to curb the third wave of infections, with France, Poland and Ukraine all implementing stricter measures.
The black gold also took a beating as the American Dollar index rose to a four-month high against its rivals, making crude more expensive for holders of other currencies.
The global oil market was also under pressure as producers faced difficulties selling to Asia, especially China. According to industry sources, Asian buyers instead took cheaper oil from storage while refinery maintenance has reduced demand.
Given the persistent demand worries and falling prices, expectations are growing that the Organization of Petroleum Exporting Countries and allies, together called OPEC+, will rollover their current supply curbs into May at a meeting scheduled for April 1.
On Wednesday, the US Energy Information Administration (EIA) reported a 1.9 million-barrel increase in crude supplies while the American Petroleum Institute (API) reported a 2.9 million-barrel increase in crude supplies.
By Adedapo Adesanya
The Naira appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, July 17, by N1.35 or 0.07 per cent to N1,380.18/$1 from N1,381.53/$1.
It also improved its value against the Pound Sterling in the same market segment during the session by N11.75 to trade at N1,854.42/£1 compared with the previous day’s N1,866.17/£1, and gained N5.69 against the Euro to sell at N1,576.99/€1 versus Thursday’s closing price of N1,582.68/€1.
In the same vein, the Naira chalked up N1 against the United States currency yesterday at the GTBank forex desk to quote at N1,388/$1, in contrast to the preceding day’s N1,389/$1, but closed flat at the black market at N1,405/$1.
The appreciation of the Nigerian currency on Friday came amid fresh signals that Nigeria is building its external reserves for protection against shocks and excessive currency volatility.
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, said the country’s gross reserves had risen above approximately $52 billion by 15 July, while net reserves had increased from about $3 billion when the current CBN leadership took office to more than $40 billion.
Mr Cardoso linked the increase in reserves to reforms that had restored greater confidence in the foreign exchange system. He also pointed to efforts to diversify foreign currency inflows, including policies designed to increase remittances through official channels.
He noted that monthly diaspora remittances had risen above $600 million and the CBN expected them to reach approximately $1 billion by the end of 2026. The target is part of a broader effort to grow reserves through recurring inflows rather than temporary measures.
The improvement, he argued, had strengthened Nigeria’s capacity to respond when unexpected events threatened market stability.
The apex bank has also launched a new digital platform that will track every foreign exchange transaction involving Bureau De Change (BDC) operators, marking a major step in its efforts to improve transparency and strengthen oversight of Nigeria’s retail forex market.
As for the crypto market, prices were up as markets overlooked geopolitical developments and macro forces weighing on the whole market ecosystem rather than anything crypto-specific, with Cardano (ADA) up by 4.6 per cent to $0.1661.
Bitcoin (BTC) jumped by 1.8 per cent to $63,968.32, Ethereum (ETH) improved by 0.9 per cent to $1,843.88, Dogecoin (DOGE) also rose by 0.9 per cent to $0.0723, Solana (SOL) soared by 0.6 per cent to $74.90, Ripple (XRP) also appreciated by 0.6 per cent to $1.08, and Binance Coin (BNB) advanced by 0.1 per cent to $567.32.
However, TRON (TRX) depreciated by 0.2 per cent to close at $0.3218, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
The prices of the crude oil grades rose Friday, as fighting between the US and Iran continued in the Middle East, leading to further attacks in Bahrain, Jordan, Kuwait, Oman, Qatar and Syria.
Brent crude futures advanced by about 4.6 per cent to $88.10 per barrel, while the US West Texas Intermediate (WTI) futures gained about 4.5 per cent to settle at $82.49 per barrel.
US forces stepped up attacks on Iranian sites, reportedly striking key bridges, railways, and an airport, prompting retaliatory action by Iran.
US Central Command said that it had completed its sixth consecutive night of strikes against Iran, hitting dozens of military targets such as military logistics infrastructure and maritime capabilities.
Centcom said more than 50,000 service members were operating across the Middle East, adding that they “remain vigilant, lethal, and ready.”
Iran said it attacked the US targets in Bahrain, Jordan, Kuwait, Oman, Qatar and Syria in retaliation for the latest round of strikes by the Americans.
Kuwait said Iran attacked a power and water desalination plant as fighting escalated in the Persian Gulf, saying that the attack damaged the facility that sparked a fire that affected a large number of its electricity-generating units, according to The Kuwait Times.
Kuwait is heavily dependent on desalination plants for potable water. Analysts have long feared that Iran would strike infrastructure that is critical to supporting civilian life in the Middle East.
A tanker was hit by a projectile off the coast of Oman, causing minor damage, the United Kingdom Maritime Trade Operations Centre said in an incident report Friday. Iran has repeatedly attacked tankers over the past week as it tries to force civilian ships to transit the Strait of Hormuz through its waters.
The escalating fighting comes as the fragile truce reached last month has collapsed, once again disrupting energy flows through the strategically vital Strait of Hormuz, which typically handles around 20% of the world’s oil traffic.
Earlier in the week, President Donald Trump said American forces would target Iran’s infrastructure next week unless the two sides reached a diplomatic breakthrough.
Iran has asked Yemen’s Houthis to close the Red Sea oil route if the US targets Iranian power infrastructure.
Market analysts noted that Iran and the US still have strong economic incentives to avoid a complete breakdown in talks, with the US seeking lower oil prices ahead of the November midterm elections and Iran reluctant to forgo economic incentives.
By Adedapo Adesanya
Despite signs that Nigeria’s headline inflation is easing, rising food prices continue to threaten the country’s inflation outlook, the chief executive of the Centre for the Promotion of Private Enterprise (CPPE), Mr Muda Yusuf, has warned.
He noted that structural inflationary pressures in the real economy remain pronounced despite improving macroeconomic stability.
In a policy brief released following the inflation report, he noted that headline inflation eased marginally, while month-on-month change moderated from 1.75 per cent to 1.66 per cent, indicating that headline inflation has largely plateaued.
According to him, the dominant concern in the latest inflation report is the renewed acceleration in food inflation.
This growth, he said, suggested that food prices have resumed an upward trajectory after a brief period of moderation.
Warning that a renewed increase in food inflation has significant economic and social implications, he stressed that food inflation remained the biggest driver of Nigeria’s cost-of-living crisis, stressing that rising food prices continue to erode household purchasing power, worsen poverty and food insecurity while weakening the inclusiveness of the current reform programme.
He maintained that sustained moderation in food prices is critical to improving citizens’ welfare and strengthening public confidence in the ongoing economic reforms.
Acknowledging the easing of core inflation as encouraging, he drew attention to the persistence of urban inflation.
At 16.08 per cent, urban inflation exceeded the national headline inflation rate of 15.91 per cent, while month-on-month urban inflation increased from 1.99 per cent to 2.13 per cent.
According to Mr Yusuf, the figures indicated that inflationary pressures remained particularly intense across urban centres.
He attributed the rising urban inflation partly to increasing population displacement from rural communities affected by insecurity, expressing worry that as more households migrate to urban areas, demand for housing, transportation, utilities and other essential services would increase, adding to inflationary pressures and creating additional urbanisation challenges.
Addressing insecurity in farming communities, he said, was important not only for protecting lives and property and boosting agricultural output but also for easing cost pressures in urban centres, adding that the June CPI data reinforced the view that Nigeria’s inflation challenge is predominantly structural rather than monetary.
On the monetary policy outlook, he said the data do not justify further monetary tightening, arguing that headline inflation has largely stabilised.
The CPPE chief expected the Monetary Policy Committee (MPC) to retain the current monetary policy rate at its next meeting, adding that the priority is for monetary and fiscal authorities to work together to accelerate structural reforms to expand food supply, improve logistics, reduce energy and production costs, lower debt service costs, as well as strengthen domestic value chains.
