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Commodities

OPEC production output now at lowest level in nearly 30 years 

Production cuts from OPEC countries and other allies have helped to revive the price of Brent Crude.

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OPEC+ Alliance, US, Russia, Canada, Mexico reach historic deal to cut 13.4 million bpd, Oil market still uncertain over the OPEC+ deal as prices react positively, 7 oil producing countries most affected by covid-19, see where Nigeria is placed

The production output of the Organisation of Petroleum Exporting Countries (OPEC) member-countries has recorded its lowest level in nearly 30 yearsdue to production cuts after demand was heavily impacted by the COVID-19 pandemic. The last time oil production was cut to 22 million barrels a day was during the Gulf War in 1991. 

Last month, OPEC cut production to 22.69 million barrels per day, in an effort to strengthen global prices for the commodity which was struggling with weak demand during a global lockdown occasioned by the pandemic. 

READ MORE: Largest private investment in Africa begins $15 billion financing

OPEC leader, Saudi Arabia, has been compliant in its production cuts through the month of June. Back home, Nigeria has promised to do its parts in implementing total compliance with the cuts. 

Production cuts from OPEC countries and other allies such as Russia (OPEC+) have helped to revive the price of Brent Crude to over $40 since May, compared to record lows in the month of April. 

Specta

While the Gulf nations have implemented further cuts, Nigeria, Angola and Iraq are still lagging in full compliance, meeting only 77%, 83%, and 70% (respectively) of their quotas. Saudi Arabia reduced production by 1.13 million barrels to 7.53 million a day in June. 

READ ALSO: Brent crude surges past $40, analyst recommends investment in crude oil derivatives

Other members like Venezuela pumped only 340,000 barrels a day in June, even though they are exempted from cuts as the country is dealing with a series of issues from US sanctions to a severe economic recession. 

Meanwhile, Russia hit its target quota for the second month in a row as countries outside the OPEC also cut production due to falling demand impacted by the COVID-19 pandemic. 

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Commodities

Gold suffers its worst January performance since 2011 amid rising U.S dollar

Spot gold dropped by 0.3% to $1,839.37 an ounce after ending 0.4% lower on Wednesday.

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Nigeria Mining Sector shows growth prospect despite low bank credit provision, Gold hits eight-year high as global recession sentiments strengthened, Gold hits three weeks high, Investors rush to gold, Gold Future Drops to $1727.80 as Tensions Escalate between America and China, Precious metals slump, investors focus on Central Bank’s intervention, FG inaugurates gold refinery project in a landmark event

The yellow metal is currently under immense pressure on the basis it lost about $50 in value in the last two trading sessions.

What you should know: At the time of drafting this report, Spot gold dropped by 0.3% to $1,839.37 an ounce after ending 0.4% lower on Wednesday.

The precious metal has lost more than 3% this month, its worst January performance since 2011, as global investors weighed on the strong U.S dollar, prospects for more stimulus programs, and most importantly the surging viral attacks by COVID-19.

  • The U.S Fed Reserve Chairman, Jerome Powell hinted that the availability of vaccines was grounds for optimism, further saying such could mean a significant improvement for the world’s biggest economy later this year.”
  • Gold prices have also been under pressure, taking into account the U.S Federal Reserve left its benchmark interest rate unchanged as expected and stuck with the current pace of bond-buying, thereby supporting the dollar and putting bullion on course for the worst start to a year in 10 years.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on market conditions weighing on gold prices

“With the FOMC only holding the interest course, it wasn’t enough to boost gold, especially in the face of a more robust “safe-haven demand for the US dollar. Compounding matters gold is getting sold again, lightly mind you to cover margin calls weighing on sentiment.”

Specta

Bottom line: That said the precious metal is in a tight corner, as gold traders remain stuck in a tight range around.
Still, the trend is looking less and less constructive, as the yellow metal struggles to recover from the selloff that took place at the start of the year, and with the historically bullish January seasonality already taken out of the equation.

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Commodities

Oil prices stay resilient amid pressure from COVID-19

Oil prices rallied after industry data showed U.S. crude inventories dropped unexpectedly last week amid fears that the COVID-19 infection,

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Oil workers will be paid N75 billion worth of salaries in 2020 , Oil production drops, as Nigeria complies with OPEC+ output cuts  , Global oil demand set to plunge by 29 mb/d Global oil demand set to plunge by 29 mb/d

Oil prices rallied at the mid-week trading session after industry data showed that U.S. crude inventories dropped unexpectedly last week amid fears that the COVID-19 infection rates were getting out of control.

  • U.S. West Texas Intermediate (WTI) rose 0.2%, to trade at $52.71 a barrel, reversing some of yesterday’s loss.
  • Brent crude oil futures rallied by 0.2% to $56.02 a barrel.

What this means: Recent data retrieved from the American Petroleum Institute (API) showed crude oil inventories in the world’s biggest oil consumer, dropped by 5.3 million barrels in the week to Jan. 22 compared with analysts’ expectations in a Reuters poll for a build of 430,000 barrels.

READ: First cargo of Nigeria’s newest crude grade, Ayala, to arrive Europe

China’s National Health Commission revealed that the world’s largest importer of oil recorded 124 cases on Jan. 24, up from 80 earlier, which is the worst wave of new COVID-19 infections seen since March 2020.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing macros helping oil prices though other reports reveal that oil would remain under pressure amid energy demand/supply rebalancing;

Specta

“Oil received a timely fillip after the API reported that US crude supplies declined 5.3 million barrels bullishly against consensuses.

READ: Gold prices stay firm, investors await Janet Yellen’s speech

“But problems may continue to linger under the hood as the data also reportedly indicated gasoline stock rose by near 3.1 million barrels. At the same time, the draws at Cushing make sense in backwardation markets.

“Even when mired in the pandemic’s darkest days, oil prices remain incredibly resilient in no small part due to OPEC’s dogged determination to stay in damage control mode adjusting supply constraints to alleviate the currently projected level of attrition to global demand.”

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READ: Crude oil prices drop, COVID-19 cases hit 38 million

What to expect: While the general upward direction of travel in the market makes sense, it’s difficult for oil traders to make a definitive near-term shift to the next price level higher, given the very uncertain near-term demand outlook.

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Commodities

Gold traders remain cautious despite urgency in $1.9 trillion stimulus plan

Gold traders are of the bias that the precious market is heading from neutral to bearish…

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gold, Gold fast losing the battle to Bitcoin

Gold prices at Tuesday’s trading session moved slightly higher, despite the White House’s recent statement that there’s an “urgency” to passing the $1.9 trillion stimulus plan.

What you should know: At press time, gold futures were trading at around $1860/ounce.

Gold bug’s upside this week seems to be curbed in spite of its surge last week when it rose more than $26, or 1.4%, after losing almost 3.5% in two previous weeks combined.

READ: Gold prices drop on U.S. Senate run-off elections

  • Gold traders are of the bias that the precious metal’s market is heading from neutral to bearish as recent price action reveal the potential head and shoulders chart pattern continues to form on the daily charts, and energy is building during consolidation.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke in detail on macros that could put gold prices upside limited at least for the near term:

Specta

“Gold conceded ground to stronger dollar overnight but remains bid against escalating US-China tensions over Taiwan. Gold is struggling to break out. Most short-term fundamentals suggest upside from here, but extended speculative positioning is acting as a drag.

READ: Present day cryptos won’t last long – Bank of England

“We will see what progress is made on the US USD1.9 trillion fiscal stimulus package during the remainder of the week. Presumably, the smoother it passes, the more favorable for gold.”

What to expect: On the central bank front, the highlight is the FOMC decision. The FOMC meeting should be gold supportive, but not new news. Robust GDP data could weigh on gold if yields react higher.

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