By Adedapo Adesanya
Oil fell on Wednesday, November 3 after United States crude stocks rose more than expected in the most recent week.
Brent crude depreciated by 0.79 per cent or 65 cents to close at $81.34 per barrel as the US West Texas Intermediate (WTI) depleted by 1.09 per cent or 88 cents to trade at $79.98 a barrel.
Oil started to drift lower shortly after the Energy Information Administration’s (EIA) reported that crude oil inventories grew by 3.3 million barrels for the week ending October 29.
The report followed another sober data posted on Tuesday by the API, which showed a 3.6 million barrel build to crude oil—the sixth straight such build, according to the industry body.
Despite the six weeks of builds, US crude inventories are still 57 million barrels below where they were at the beginning of the year.
Cushing inventories have already drawn down more than 30 million barrels so far this year.
With the API and EIA data pushing prices down, oil prices will be at looking at the outcome of the Organisation of the Petroleum Exporting Countries and allies (OPEC+), which holds on Thursday.
The general sentiment in the market is that OPEC+ will stick to its planned production cut easement of 400,000 barrels per day.
However, this has continued to trouble world leaders like the American President, Mr Joe Biden, who blamed the high prices of fuel on OPEC’s refusal to push more barrels into the market.
The US President has taken every opportunity to ask OPEC to turn on the taps and increase production more than the group has planned, which is for a 400,000 barrels per day increase in production per month.
The latest came at a climate summit in Glasgow where he also attributed higher inflation to the coronavirus slowing down the supply chain.
Prices were also weakened as the market worried about the potential tapering of the US Federal Reserve asset purchases that could slow growth and reduce appetite for riskier inflation-hedge assets such as crude futures.
The US Dollar was strengthened before the Fed’s announcement, further weighing on oil prices as a stronger dollar makes crude more expensive for holders of other currencies.
OPEC+ will meet today and analysts note that apart from agreeing on production levels for December, OPEC+ must also consider what to do with Nigeria and Angola which trail their combined quota by more than 400,000 barrels per day due to various problems.
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.
Equity Exchange Loses N33bn Amid Low Turnover
By Dipo Olowookere
The bears returned to the domestic equity exchange on Thursday after profit-taking in banking and consumer goods stocks shrank the trading indices by 0.12 per cent.
Business Post observed that the banking index shed 0.62 per cent as the consumer goods counter depreciated by 0.03 per cent, while the insurance and industrial goods sectors gained 0.61 per cent and 0.10 per cent respectively, with the energy index closing flat.
At the close of trades, the All-Share Index (ASI) depleted by 60.87 points to 50,014.60 points from 50,075.47 points, while the market capitalisation deflated by N33 billion to N26.976 trillion from N27.009 trillion.
The loss posted yesterday was heavily impacted by blue-chip stocks led by MTN Nigeria, Zenith Bank and others as the market breadth closed positive with 21 price gainers and 15 price losers led by ABC Transport, which fell by 6.67 per cent to 28 Kobo.
Jaiz Bank went down by 5.56 per cent to 85 Kobo, Stanbic IBTC declined by 3.28 per cent to N28.05, Caverton depreciated by 2.86 per cent to N1.02, while UBA lost 2.78 per cent to sell for N7.00.
The share price of NAHCO improved during the session by 10.00 per cent to N5.83 as FCMB appreciated by 9.84 per cent to N3.35. Ikeja Hotel gained 9.43 per cent to quote at N1.16, Multiverse grew by 9.22 per cent to N2.25, while Courteville increased its share value by 8.51 per cent to 51 Kobo.
The activity chart was mixed on Thursday as the day was marred by low turnover after the volume of transactions decreased by 52.16 per cent to 133.6 million units from the previous day’s 279.2 million units.
However, the trading value improved by 17.06 per cent to N2.4 billion from N2.1 billion, while the number of deals appreciated by 20.02 per cent to 4,292 deals from 3,576 deals.
UBA sold the highest volume of shares on the floor of the Nigerian Exchange (NGX) Limited on Thursday, 20.5 million units valued at N143.7 million and was closely followed by Chams, which sold 9.0 million units worth N2.8 million. Access Holdings transacted 8.2 million shares for N72.7 million, Japaul exchanged 7.4 million equities worth N2.9 million, while Jaiz Bank traded 7.1 million stocks valued at N6.2 million.
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