By Adedapo Adesanya
Oil prices extended their 5 per cent slump from Wednesday into Thursday after it plunged by more than 3 per cent as major economies in Europe renewed lockdowns to fight the second wave of the coronavirus.
Brent crude went down to $37.56 per barrel on the back of a decline of 3.99 per cent or $1.56, while the United States’ West Texas Intermediate (WTI) crude fell by $1.30 or 3.48 per cent to close at $36.09 per barrel.
Prices had reacted to the government response to the second wave of the pandemic as oil market participants remain concerned that the return of lockdowns in Europe will significantly weigh on economic recovery and fuel demand.
Two of the largest economies in Europe, Germany, and France, announced the restriction of movements, which the market was not expecting two or three weeks ago.
Many analysts did not believe that countries would resort to another nationwide curfew. However, France did, and from Friday, October 30, people will be allowed to go out only for shopping for essential items, for medical reasons, or for an hour-long exercise. The measure will last until the end of November, French President Emmanuel Macron said.
Germany, the biggest economy in Europe, is also restoring a partial lockdown, for the month of November, restricting social gatherings and closing bars and restaurants except for takeaway.
The market is also feeling the impact of Libya’s return to the game as expectations show that production will reach 1 million barrels per day in the next few weeks, doubling from levels earlier this month.
The opening of two key oil terminals – Ras Lanuf and Es Sider following last week’s ceasefire agreement allowed the country to ramp up production to above 500,000 barrels per day.
These latest developments mean the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) has some tough decisions to make on the path forward for its output curbs next month.
OPEC+ would really need to implement further production cuts, given the weak prospects for demand. The alliance is scheduled to meet on November 30 and December 1 to set policy.
It was reported that the two leaders of the OPEC+ pact, Saudi Arabia and Russia, would be inclined to favour rolling over the cut of 7.7 million barrels per day in 2021, instead of easing them by 2 million barrels per day agreed in the current OPEC+ production deal.
However, it was rumoured that Iraq, the United Arab Emirates (UAE) and Kuwait, the biggest OPEC producers behind Saudi Arabia, appear not to support a rollover of the cut of 7.7 million barrels per day because it is too deep for their economies and budget incomes to sustain.
Due to the environment, oil prices could not capitalise on the prospect of tighter short-term supply as Hurricane Zeta hits Louisiana in the US which reduced production for the day. Instead, the hurricane is forecast to weaken and the return of US production will add to existing oversupply.
Crude oil inventories in the US increased by 4.3 million barrels in the week ending October 23, the weekly report published by the US Energy Information Administration (EIA) revealed on Wednesday. Analysts estimate was for an increase of 1.2 million barrels.
Nigeria’s GDP Grows by 3.11% in Q1, What Next?
By Lukman Otunuga
There are two ways one could interpret Nigeria’s latest Gross Domestic Product (GDP) figure of 3.11% in Q1 of 2022.
The optimists will say the country’s economy grew for the sixth consecutive quarter in Q1 while pessimists may highlight how economic growth slowed for the third consecutive quarter.
Either way, Nigeria’s economy continues to display resilience against external and domestic risks. With the improvement in the non-oil sector driving growth, this may brighten the growth outlook. But could these be signs of Nigeria breaking away from the chains of oil reliance to derive growth from sustainable sources? It may be too early to come to any meaningful conclusion. However, the report is encouraging and illustrates progress made by the country in reclaiming stability post-Covid-19.
With economic conditions somewhat improving, the Central Bank of Nigeria (CBN) is unlikely to raise interest rates this week. Given how Africa’s largest economy has been able to maintain growth in the past six quarters on the back of loose monetary policies by the CBN, a rate hike could disrupt Nigeria’s economic recovery.
As the global war against inflation rages on, central banks are stepping up.
However, the CBN is likely to remain on the sidelines for now. Nevertheless, inflation is still a cause for concern with consumer prices accelerating for the third straight month to 16.82% in April 2022.
With the general elections around the corner, pre-election spending could translate to rising price pressures. On top of this, the widening policy divergence between the Federal Reserve and the CBN could punish the Naira.
It’s worth keeping in mind that the dollar remains heavily supported by aggressive Fed rate hike bets and is likely to remain strong for the rest of 2022. A powerful dollar is bad news for emerging market currencies including the Naira which continues to depreciate in both the official and unofficial markets.
Lukman Otunuga is the Senior Research Analyst at FXTM
NGX All Share Index Weakens Further by 0.13%
By Dipo Olowookere
The bearish sentiment on the floor of the Nigerian Exchange (NGX) Limited continued on Monday as the bourse further depreciated by 0.13 per cent.
Sustained profit-taking especially in the industrial goods sector contributed to the decline suffered during the session as the All Share Index (ASI) slumped by 68.45 points to close at 52,911.51 points compared with the previous session’s 52,979.96 points.
As for the market capitalisation, it depreciated by N37 billion amid sell-offs in 24 stocks to settle at N28.525 trillion as against last Friday’s closing value of N28.562 trillion.
On the first trading day of this week, the insurance sector depleted by 2.32 per cent, the industrial goods sector fell by 0.09 per cent, while the energy, banking and consumer goods counters increased by 0.28 per cent, 0.10 per cent and 0.05 per cent respectively.
Presco led the losers’ chart yesterday with a price decline of 10.00 per cent to trade at N180.00, Global Spectrum Energy Services lost 9.97 per cent to finish at N3.07, Neimeth fell by 9.66 per cent to N1.59, UAC Nigeria depreciated by 8.33 per cent to N13.20, while NEM Insurance retreated by 7.74 per cent to N4.05.
The gainers’ log had 22 members on Monday, with Conoil leading after its value improved by 9.95 per cent to N34.25. MRS Oil gained 9.93 per cent to quote at N14.95, McNichols appreciated by 9.86 per cent to N2.34, Academy Press increased its price by 9.76 per cent to N1.35, while NPF Microfinance Bank expanded by 8.02 per cent to N2.02.
On the activity chart, a total of 263.3 million stocks worth N3.6 billion exchanged hands in 4,856 deals during the session compared with 436.6 million stocks worth N3.2 billion bought and sold in 4,716 deals in the preceding session. This implied that the volume of trades depreciated by 39.68 per cent, while the value of trades and the number of deals increased by 10.15 per cent and 2.97 per cent respectively.
Jaiz Bank closed the day as the most active stock with the sale of 114.0 million units valued at N101.8 million, GTCO transacted 12.9 million shares for N302.8 million, Transcorp exchanged 12.8 million stocks worth N16.7 million, Access Holdings traded 11.7 million equities valued at N115.7 million, while Zenith Bank sold 8.6 million shares for N207.0 million.
CSCS Leads NASD Bourse to 0.39% Loss
By Adedapo Adesanya
The National Association of Securities Dealers (NASD) Over-the-Counter (OTC) Securities Exchange opened the week on a bearish note as it lost 0.39 per cent on Monday on the back of a slip in the price of Central Securities Clearing System (CSCS) Plc.
The share price of CSCS Plc went down by N1.23 or 7.8 per cent during the session to N15.72 per unit from the previous session’s N16.95 per unit.
The decline posted by the stock outshone the gains printed by FrieslandCampina WAMCO Nigeria Plc and NASD Plc at the unlisted securities market yesterday.
FrieslandCampina recorded a 0.9 per cent or N1 growth to close at N110.00 per unit as against the N109.00 per unit it closed last Friday, while NASD Plc appreciated by 28 kobo or 2.0 per cent to trade at N14.00 per share in contrast to the last price of N13.72 per share.
But at the close of transactions, the market capitalisation of the NASD bourse shed N4.07 billion to settle at N1.03 trillion as against the preceding session’s N1.04 trillion, while the NASD Unlisted Securities Index (NSI) fell by 3.11 points to 789.94 points from 793.05 points.
At the market yesterday, the volume of securities traded by investors depreciated by 60.9 per cent to 3.8 million units from 9.6 million units, the value of securities, however, jumped by 36.9 per cent to N63.7 million from N46.5 million, while the number of trades went down by 45.8 per cent to 13 deals from 24 deals.
AG Mortgage Bank Plc remained the most traded stock by volume (year-to-date) with 2.3 billion units valued at N1.2 billion, CSCS Plc stood in second place with 662.2 million units worth N13.9 billion, while Food Concepts Plc was in third place with 134.0 million units valued at N115.0 million.
In terms of the most active stock by value (year-to-date), CSCS Plc remained on top with 662.2 million units exchanged for N13.9 billion, VFD Group was in second place with 9.4 million units valued at N2.9 billion, while AG Mortgage Bank Plc was in third place with 2.3 billion units worth N1.2 billion.
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