Commodities
Gold prices drop lower, as U.S dollar picks up from its 2-year low
Prices of gold futures dropped below $1,980, a crucial support level thanks to the dollar’s recent strength.
Gold prices drifted lower on Wednesday morning at Asia’s trading session. This plunge in the price of the yellow metal was triggered by impressive US economic data and the US dollar bouncing back from its 2-year low.
Gold futures dropped by about 0.45% to trade at $1,970 by (5:56 GMT), while the U.S dollar index inched up 0.04% to 92.377.
Prices of gold futures dropped below $1,980, a crucial support level, thanks to the dollar’s recent strengthening, and a better-than-expected US manufacturing data released yesterday, which restored hopes for economic recovery. The ISM manufacturing Purchasing Managers Index (PMI) for August came at 56, better than the expected 54.5 and 54.2 in July.
READ: Why Warren Buffett’s company is buying shares of a gold mining company
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke on the seasonality of the yellow metal. He said:
“There is moderately bearish seasonality for gold in September; the metal has gone down about 2% in the month over the last five years on average.
“The pace of gold accumulation via ETF instruments seems to have slowed down slightly over a previous couple of months, while fast-money positioning is probably still relatively elevated long contacts.”
READ: Global Stocks rise higher, on positive Chinese manufacturing report
However, it should be noted that the recent impressive U.S economic data doesn’t necessarily change the strategy of the U.S. Federal Reserve. The trend for gold still looks bullish.
What you must know about gold: The precious metal tends to usually rise in value on expectations of lower U.S interest rates, which reduces the opportunity cost of holding non-yielding bullion. Also, it usually rallies up, when the U.S dollar is showing weakness.
Commodities
Oil supply feared to drop by 3%, as new cases of COVID-19 infections increase
Growing concern that oil supply could fall by 3% continues as a result of increasing cases of COVID-19 in the US and Europe.
There is a growing concern that oil supply will fall by 3%, escalating last week’s losses as a result of growing cases of COVID-19 in the United States and Europe.
This has raised worries about the market conditions – the demand and supply of crude oil. The United States reported its highest number of new coronavirus infections in two days – Saturday inclusive, while in France, new cases hit a record of more than 50,000 on Sunday, underlining the severity of the outbreak.
On the supply side, Libya’s National Oil Corp on Friday ended its force majeure on exports from two key ports and said production would reach 1 million barrels per day (bpd) in four weeks, a quicker ramp-up than many analysts had predicted.
OPEC+, a grouping of producers including the Organization of the Petroleum Exporting Countries (OPEC) and Russia, is also set to increase output by 2 million bpd in January 2021, after cutting production by a record amount earlier this year.
What you should know
Recently, Nairametrics reported that the oil prices had continued to decline as a result of worsening COVID-19 pandemic cases which are threatening to bring more restrictions on movement and consumption and ultimately hit demand for crude products.
What they are saying
According to Avtar Sandu, Senior Manager of Commodities at Phillip Futures in Singapore, “New barrels of Libyan oil come at a time when the crude oil market had just faced the disappointment from the recently concluded OPEC+ ministerial panel, when the organization made no new policy proposals.”
Last week, Russian President, Vladimir Putin, indicated he may have to agree to extend OPEC+ oil production reductions if that could be beneficial in stabilizing the market.
Commodities
Crude oil prices close lower W/W, oil traders wary
Both oil contracts suffered heavy losses as reports from U.S oil rig count gained up to 211 from last week’s level of 205.
Crude oil prices ended W/W on a bearish note. The slide is significantly attributed to the soft demand in gasoline, as COVID-19 restrictions in certain emerged markets began to take its toll on crude oil demand.
- New York-traded West Texas Intermediate futures settled at $39.85 per barrel. For the week, West Texas Intermediate dropped 2.5%.
- Not forgetting the British traded oil contract, Brent crude settled at $41.77.
- Both oil contracts suffered heavy losses as reports from U.S oil rig count gained up to 211 from last week’s level of 205.
- Oil rigs, indicators of future production have steadily climbed since the week ended Sept 4, when they stood at 180.
READ: OPEC predicts a deeper drop in global oil demand, based on serious coronavirus challenges
Adding to the weight on the market were estimates that Libyan oil output, mostly offline since January, had risen to 500,000 barrels per day and will likely grow further by October end.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave key insights on moves made by OPEC+ to keep pricing in check, as the virus negatively affects the fragile energy market.
READ: U.S dollar posts best monthly gains in 14 months
“One would have to assume OPEC+ decision will depend on the price/curve shape outcome for November. Traders remain unwavering that OPEC will continue to defend the downside for oil prices via a more calibrated monthly market evaluation and inventory management approach.
“OPEC hopes to tighten near-term balances push spot prices higher than ‘forward prices’, the elusive backwardation, encouraging inventory draws.
READ: Oil prices drop, currently on anemic demand
“My view is until this unambiguously occurs, OPEC will cover the markets back. Positively for OPEC compliance concerns, all the push pump-happy members appear to follow the compensation principles.”
Explore Data on the Nairametrics Research Website
What to expect
In the days ahead, crude oil prices are expected to be range-bound, as oil traders are now focusing on the most important election coming up in the world’s largest economy in about two weeks’ time. That said, crude oil prices will continue to be influenced by the outcome of the newly registered COVID-19 vaccine.
Commodities
Nigeria’s $1.5 billion steel plant set to produce 1 million MT of steel annually
Nigeria nears steel independence as $1.5 billion steel plant in Kaduna is set to produce 1 million MT of steel annually.
The Federal government of Nigeria has disclosed that it is expecting an annual output of one million metric tonnes of steel from its $1.5 billion steel plant in Kaduna.
This was disclosed by the Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed while inspecting the steel plant facility at the African Natural Resouces and Mines Limited in Kaduna.
READ: Why Ajaokuta Cannot Make Steel
READ: CBN restricts forex for milk import to Nestle, Chi, Friesland, 3 others
According to The Punch, Mrs Zainab Ahmed during the inspection of the facility said that the $1.5 billion steel plant which is now nearing completion, would produce one million metric tonnes of steel annually. She emphasized that the facility is critical to the nation as it is tactical to the looming steel revolution in Nigeria.
READ: Maize Scarcity: Premier Feeds, Crown Flour, 2 others import 262,000MT of Maize
What you should know
The $1.5 billion steel plant built by African Resources and Mines Limited, a subsidiary of African Industries Group (AIG) is at an advanced stage of completion.
The plant which is billed to commence the first phase of production in the mining of Iron ore, and production of Direct Reduced Iron in a matter of months is expected to produce one million metric tonnes of steel annually.
(READ MORE:FG to provide support to Aviation investors)
Why this matters
This development is expected to resuscitate Nigeria’s steel industry which has been lifeless for a while, and help put an end to the importation of steel in Nigeria. This will also reduce the pressure on the Nation’s foreign reserve, and bolster the foreign reserve of the country.
It is expected to boost domestic steel production and attract foreign investors’ participation in the industry, especially auto producers around the world.
However, the facility will create employment opportunities for Nigerians both directly and directly and indirectly.
READ: House of Representatives oppose concession of Ajaokuta Steel Plant
What they are saying
Alok Gupta, the Group Managing Director of AIG, said the firm would be mining iron ore to produce direct reduced iron, which would enable the company to produce higher-grade steel more efficiently.
He explained that the investment by the company in the Nation’s steel industry will dramatically increase domestic production, and this will have multiple effects on the Nigerian economy.
READ: CBN moves to reduce cassava derivatives import worth $600 million
READ MORE:FG slashes 2020 budget by N318 billion, sends to NASS
The Minister of Finance emphasized that the recent investment in the steel industry by AIG which is about to yield gains both for the company and the economy will attract the auto industries of the world to come into Nigeria and produce cars in Nigeria for Nigerians, and other countries in West Africa.
READ: Kachikwu advocates refineries repair as petrol landing cost reaches N180 per litre
Bottomline
The investment of AIG in the steel industry is expected to drive the country towards steel independence, and pave the way for Nigeria’s steel revolution and the development of the automobile industry in the nation.
Explore Data on the Nairametrics Research Website
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