By Adedapo Adesanya
The prices of crude oil were down on Tuesday as the market was seized by expectations that the United States Federal Reserve will bump up the interest rate more than expected.
Brent crude lost $1.18 or 0.97 per cent to trade at $121.09 per barrel while the US West Texas Intermediate (WTI) crude slid $2.00 or 1.65 per cent to sell at $118.93 per barrel.
The market is expecting the US central bank to hike rates by 50 basis points at its meeting on Wednesday but after a surprisingly strong consumer price index (CPI) data for May, market watchers now expect a rate hike of 75 basis points.
Last week, the US Labor Department data released on Friday for May showed consumer price inflation accelerating to 8.6 per cent and this opened the door for speculation of an even greater basis point hike, which is driving down oil prices.
Several media reports, following an initial report in the Wall Street Journal, also signalled the possibility of a higher hike, several high-profile analysts, including those at institutions like JP Morgan and Goldman Sachs joined in.
However, a decision will not be reached till later on Wednesday.
Oil prices were pressured by reports that US Senate Finance Committee plans to introduce legislation setting a 21 per cent surtax on oil company profits considered excessive.
The bill would apply a 21 per cent additional tax on excess profits of oil and gas companies with more than $1 billion in annual revenue.
This took away the spotlight from the tightening oil market following a drop in exports from Libya amid a political crisis that has hit output and ports.
This happens as the Organisation of the Petroleum Exporting Countries (OPEC) failed to lift its production as agreed for the month of May.
According to OPEC’s latest Monthly Oil Market Report released on Tuesday, oil demand could be foiled by Russia’s invasion of Ukraine.
Saudi Arabia and the UAE are the only members that have any room to increase production but the extra production from the two Middle East producers was offset by an even greater decline in production from Libya, Nigeria, and Iraq.
Other OPEC+ producers are struggling to meet production quotas and Russia faces bans on its oil over the war in Ukraine.
The American Petroleum Institute (API) reported a build this week for crude oil of 736,000 barrels, while analysts predicted a draw of 1.2 million barrels.
The small build comes as the US Department of Energy released 7.7 million barrels from the Strategic Petroleum Reserves in Week ending June 10.
The market will await the official data from the US Energy Information Administration on Wednesday for US crude and fuel inventory data which analysts forecast have fallen by 1.2 million barrels last week.
Value of Naira Falls at P2P, I&E, Parallel Market Forex Scarcity Worsens
By Adedapo Adesanya
The Naira further weakened against the United States Dollar in the various segments of the foreign exchange (forex) as the scarcity of hard currencies is getting worse, putting pressure on the local currency.
In the Peer-to-Peer (P2P) segment, the Nigerian currency was battered by the Dollar by N6 or 0.87 per cent to settle at N696/$1 versus the previous day’s value of N690/$1 and in the Investors and Exporters (I&E) window, the domestic currency fell by N1.50 or 0.29 per cent to trade at N430.25/$1 in contrast to Wednesday’s value of N428.75/$1 as the turnover for the session stood at $58.37 million.
Also, in the parallel market, the Naira depreciated by N8 or N1.19 per cent to quote at N680/$1 compared with the previous day’s value of N672/$1 and in the interbank segment, the domestic currency lost N5.51 against the Pound Sterling to sell for N513.10/£1 in contrast to N507.59£1 and against the Euro, the Nigerian currency went down by N4.7 to close at N433.78/€1 versus the N429.08/€1 it was sold a day earlier.
In the cryptocurrency market, the bears maintained their grip as nine of the 10 tokens tracked by Business Post pointed south, with Solana (SOL) losing 4.1 per cent to sell at $42.94.
Cardano (ADA) recorded a 2.9 per cent fall to sell at $0.5288, Binance Coin (BNB) recorded a 2.9 per cent depreciation to trade at $323.25, TerraClassicUSD (USTC) retreated by 2.7 per cent to quote at $0.0292, Bitcoin (BTC) fell by 2.5 per cent to sell at $23,939.78, Ripple (XRP) recorded a 1.2 per cent loss to trade at $0.3769, Dogecoin (DOGE) depreciated by 1.7 per cent to trade at $0.0708, Litecoin (LTC) lost 0.9 per cent to settle at $61.68, while Ethereum (ETH) declined by 0.1 per cent to sell at $1,888.23.
However, the value of the US Dollar Tether (USDT) remained unchanged yesterday at $1.00.
Crude Oil Jumps 2% as IEA Forecast 2022 Demand Growth
By Adedapo Adesanya
Prices of crude oil expanded by more than $2 on Thursday after the International Energy Agency (IEA) raised its demand growth forecast for this year.
Brent crude futures gained $2.20 or 2.3 per cent to settle at $99.60 a barrel while the United States West Texas Intermediate (WTI) crude futures rose by $2.41 or 2.6 per cent to $94.34 per barrel.
Global crude oil demand will rise by 2.1 million barrels per day this year, the IEA said in the latest monthly edition of its flagship Oil Market Report, spurred by the switch from gas to oil for electricity generation.
The new number is 380,000 barrels per day higher than the previous monthly forecast. It also means that the IEA now expects global oil demand this year to average 99.7 million barrels daily.
Supply, according to the IEA, already exceeds demand, as it hit 100.5 million barrels per day last month, with production from the Organisation of the Petroleum Exporting Countries and allies (OPEC+) adding 530,000 barrels per day in line with the production increase deal and non-OPEC+ output rising by 870,000 barrels per day.
“With several regions experiencing blazing heatwaves, the latest data confirm increased oil burn in power generation, especially in Europe and the Middle East but also across Asia,” the International Energy Agency said in its report. “Fuel switching is also taking place in European industry, including refining,” it said.
The agency also revised upwards its forecast for oil supply for the full year, noting a smaller than expected decline in Russian oil production and exports.
By contrast, OPEC cut its 2022 forecast for growth in world oil demand, citing the impact of Russia’s invasion of Ukraine, high inflation, and efforts to contain the pandemic.
OPEC expects 2022 oil demand to rise by 3.1 million barrels per day, down 260,000 barrels per day from the previous forecast. It still sees a higher overall global oil demand figure than the IEA for 2022.
OPEC+, however, is not eager to tap into this effective spare capacity, which would diminish the group’s power to respond to market emergencies with increased production.
After OPEC+’s last meeting in early August, OPEC+ referred to its “severely limited” spare capacity, which should be used with “great caution in response to severe supply disruptions”, reinforcing the IEA’s predictions that additional OPEC+ output increases are unlikely in the coming months.
Treasury Bills Rates Rise Across Tenors at Primary Market
By Dipo Olowookere
The Central Bank of Nigeria (CBN) offered treasury bills to investors at attractive rates at the primary market auction (PMA) on Wednesday as the government intends to use the avenue to borrow more money from the local debt market.
The stop rates were increased by the apex bank across the three maturities offered for sale during the session, with the shortest end of the curve witnessing the highest jump.
According to an analysis of the sales, the 91-day bill cleared at 3.50 per cent, 0.70 per cent higher than the previous session’s stop rate of 2.80 per cent. The 182-day tenor was sold to traders at 4.50 per cent, 0.40 per cent higher than the 4.10 per cent offered at the preceding PMA, while the 364-day maturity cleared at 7.45 per cent, 0.45 per cent higher than the 7.00 per cent of the earlier exercise.
Business Post reports that the CBN, which auctioned the debt instruments for the Debt Management Office (DMO) on behalf of the federal government of Nigeria, offered for sale N150.62 billion worth of the T-Bills and it received subscriptions valued at N187.53 billion, with an allotment of N150.62 billion made at the end of the exercise.
A breakdown showed that N1.02 billion worth of the three-month bill was auctioned by the central bank but bids worth N1.80 billion were received and N1.15 billion issued to subscribers, with the range of bid rates between 2.70 per cent and 10.00 per cent.
As for the six-month instrument, N1.82 billion was taken to the market but the appetite for this maturity was low as subscriptions worth N1.69 billion were processed between 4.10 per cent and 7.00 per cent, but the apex bank sold N1.3 billion at 4.5 per cent.
It was observed that the strong demand for higher tenors, ostensibly because of the higher rates, continued during the exercise for the 12-month bill. The CBN approached the market with N147.78 billion worth of the instrument but the demand rose to N184.04 billion, with investors bidding between 6.00 per cent and 12.00 per cent. However, the bank issued N148.15 billion at 7.45 per cent.
This trend is expected to continue at the next PMA as investors shop for investment tools that will fetch them higher yields amid rising inflationary pressures eroding the gains from risk-free assets.
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