Commodities
Crude oil prices record gains after tropical storm hit Gulf of Mexico
Tropical Storm Sally picked up its strength in the Gulf of Mexico, west of Florida yesterday.
Crude oil prices began the first trading session of the week on a bullish note. The feat was triggered after a tropical storm in the Gulf of Mexico compelled major U.S oil producers to shut down their oil rigs, but the upsurge in crude oil prices were capped by growing concerns about the falling demand for gasoline.
At the time of this report, U.S. West Texas Intermediate gained 0.51%, to trade at $37.52 per barrel, and Brent crude prices were up 0.25% to trade at $39.93 per barrel.
Both crude oil contracts ended lower in the previous week, its second consecutive week of decline.
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Yesterday, Tropical storm Sally, picked up its strength in the Gulf of Mexico, west of Florida, and was turning to become a category 2 hurricane. The hurricane storm is disrupting oil supplies for the second time in less than four weeks, after hurricane Storm Laura swept through the Gulf coast.
What it means: Usually, crude oil prices surge higher when oil supplies are shut down, however, with the global exponential growth in COVID-19 caseloads, and oil demand falling momentarily, oil traders remain relatively cautious.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, gave insights into the fundamentals, keenly monitored by oil traders.
READ: Nigeria, only oil producing nation that does not benefit from price increase – Sanusi
“Oil traders are back on hurricane watch, but it is all shoulders and heels while dancing to the tune of broader markets, amid more gloom on the supply-side,”
“Some Gulf of Mexico oil producers, on Saturday, idled production bracing for another hurricane brewing off Florida. But so far, the hurricane impact is getting offset by yet another gloomy short-term view that is likely limiting OPEC’s attempt to stabilize markets,”
READ: Oil prices rally higher, as U.S oil producers suspend operations in Gulf of Mexico
“Reports that Libyan commander, Khalifa Haftar gave his ‘personal commitment’ to reopen the energy sectors, could bring more barrels back to the market at the most unwelcome time of the year,”
“Unquestionably, this could put OPEC+ in an even more giant pickle, when they hold a virtual meeting on Thursday to review the current production intervention level’s price impacts.”
Commodities
Gold prices tumble, hit lowest level since July
Gold bulls are presently nursing their wounds amid the sharp drop seen lately in gold prices
Gold bulls are presently nursing their wounds amid the sharp drop seen lately in gold prices. At Tuesday’s trading session, the yellow metal dropped through the $1,800 mark for the first time since July.
What we know: At the time of writing, Gold futures were down 0.16% to trade at $1,801.75/ounce after losing over 35 dollars on Tuesday alone amid a strong appetite for risk among global investors on COVID-19 vaccine turned them away from safe-haven assets.
Adding to the current wave of optimism is the official approval given to the U.S. presidential transition process given by Emily Murphy, director of the General Services Administration.
In an explanatory note to Nairametrics, Stephen Innes Chief Global Market Strategist at Axi spoke on the macros giving gold bears such resolve in taking the price bandwagon down to its lowest level since July;
“The improved expectation for material vaccine deployment in 2021 has likely closed the door on the gold upside. And given the heft of ETF positions, especially the massive accumulation since the beginning of this year, there is definite scope for a deluge of ETF unwinds. So, look for a massive clear out again on a break of the psychological $1800.
“Gold fell and hit its lowest level since July. It is much of the same – transfer of ownership continues into stable allocation – with no huge clips dealing with Asian banks providing the offer during Shanghai Gold Exchange hours.
“Gold rout continues as investors embrace vaccine news. The break of USD1,800/oz support may take prices near USD1,750/oz as surging investor optimism due to promising COVID-19 vaccines has undermined gold and silver.”
What to expect: The precious metal will continue to be under immense pressure from the gold bears taking into account the commanding macro theme related to a vaccine recovery and the reduced risks associated with central bank debt monetization or the pursuit of quasi-modern monetary theory.
Commodities
Oil prices hit highest level since Q1
Crude oil prices hit their highest price levels since March at the second trading session of the week.
Crude oil prices hit their highest price levels since March at the second trading session of the week. The macros driving crude oil bulls to such gains include reports that COVID-19 vaccine candidate might likely tame the rising COVID caseloads, coupled with U.S. President-elect Joe Biden going ahead to begin his leadership transition.
- At the time of writing this report, Brent crude futures rose higher than 1% to trade at $46.56 a barrel while U.S. West Texas Intermediate crude soared higher than 1%, to $43.59 a barrel.
- Brent crude futures on Tuesday struck its highest price level since early March after the fight between the two oil-producing juggernauts (Saudi Arabia and Russia), which sent oil prices melting like an ice cream exposed in the sun.
- Both major oil benchmarks closed 2% up yesterday after gaining about 5% last week.
READ: Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts
Stephen Innes, Chief Global Market Strategist at Axi in an explanatory note to Nairametrics dissected the macros hitting crude oil prices to soar higher;
“Oil benefited from the vaccine news, with WTI trading around $43 a barrel and Brent near $46 even when the US dollar rallied on positive US PMI numbers and taking a bit of steam out of the broader commodity markets.
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“While the air looks a bit thin above WTI $43, still, the announcement over the weekend that US COVID-19 vaccinations could begin in early December has spurred another wave of optimism for oil and wider markets, bolstered yesterday by the AstraZeneca version of the vaccine.
“Oil markets are rightly jumping for joy as the AstraZeneca delivery is a big deal as most of the developed world will be able to immunize its most at-risk population to COVID by the spring and likely the entire community by mid-year.”
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What to expect: The curve has continued to shift, flattening considerably from 3Q21 into 1Q22, with the time spreads from Dec21 now in backwardation. The shortage is priced into WTI from the end of next year as a capital discipline remains the priority for oil firms.
Commodities
Nigeria’s new Gold ETF and money market funds suffer huge outflow
For the second consecutive week, the New Gold ETF, which trades on the Nigerian market has suffered huge outflows.
As the rally on the cryptocurrency market continues and interest on money market funds continues to fall, investors keep moving their assets around.
For the second consecutive week, the New Gold ETF, which trades on the Nigerian market has suffered huge outflows.
READ: Is Nigeria’s mutual fund industry a duopoly dominated by two fund managers?
During the second week ending November, 13th, the new Gold ETF suffered a total redemption of N5.22 billion bringing its month-to-date (MTD) redemptions for the month of November to N21.7 billion.
This is according to analysis conducted by Quantitative Financial Analytics on the NAV Summary reports released by the Security and Exchange Commission, for the month of November, 2020.
READ: Pension fund administrators pile up cash in anticipation of withdrawals
Some money market funds have also been witnessing large outflows. Notable among them include FBN Money market fund, which has seen about N11 billion of redemptions, Stanbic IBTC money market fund has also recorded a redemption of N5.99 billion while ARM money market fund suffered a redemption of N3.487 billion, all within the month of November.
Source: Quantitative Financial Analytics
The redemptions from money market funds may not be unconnected with the near-zero interest rates being paid by the money market funds.
Currently, the FBN Money market fund’s yield is 1.79%, Stanbic IBTC money market fund now yield’s 1.36%, while ARM money market is yielding 1.717%, all on an annual basis.
READ: Top 10 high-yield money market funds that beat inflation in Nigeria
Bond Funds Benefit: A closer analysis shows that those money market fund redemptions are finding their way into various bond and fixed income funds.
Since the beginning of the month of November, bond and fixed-income funds have welcomed some large contributions. Among them are UBN Bond fund which received about N8.7 billion, followed by Stanbic IBTC Bond fund’s N7.7 billion additional contribution.
Also, in that league are Stanbic IBTC Guarantee fund and Zenith Income fund that received estimated contributions of N2.28 billion and N2.147 billion respectively.
Source: Quantitative Financial Analytics
Compared to the yields on money market funds, Bond and Fixed income funds are currently providing better yields, but they are not the best in the industry currently.
READ: Nigeria’s Pension Asset increased by N228 billion in October
This shows that investors are moving their fund investments in such a way as to derive better returns than what is obtainable from money market funds without necessarily incurring too much additional risks in the process.
Asset management implications: What is currently playing out in the Nigerian mutual fund arena is an indication that investors are cognizant of events in the market and are therefore actively managing their investments by moving them around among asset classes that are better able to give them better returns.
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