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Commodities

International Oil price rebounds

Brent crude futures rose by 60 cents or 1.4%, to close at $42.32 per barrel.

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Crude oil prices slump, as partial lockdowns resume

There is a flicker of hope for the international oil price as the London Oil prices rebounded on Tuesday, drawing support from robust China data. Although, concerns about waning demand elsewhere and supply resumptions in Norway, the Gulf of Mexico, and Libya were weighed.

READ: Soybean Futures reach 2-year high, following U.S sales to China 

Brent crude futures rose by 60 cents or 1.4%, to close at $42.32 per barrel while the West Texas Intermediate (WTI) crude futures rose by 63 cents or 1.6%, to close at $40.06 per barrel.

China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.5% from September last year.

READ: Seplat Petroleum has declared a PAT of N81.11bn for 2017

What they are saying

According to Commerzbank, “Currently, oil demand is driven primarily by China,” and according to IEA Chief, Fatih Birol, “The era of global oil demand growth will come to an end within the next 10 years, but in the absence of a large shift in government policies, I don’t see a clear sign of a peak.”

S&P Global Platts Analytics estimates Libyan crude supply could return to 500,000 b/d this month but warned that “longer-term stability remains uncertain.”

READ: Oil Prices jump after Trump provides updates on trade-war

READ: National Assembly ready to pass 2021 Budget before end of 2020 – Senate President

What you should know

  • Workers have been returning to the U.S. Gulf of Mexico platforms after Hurricane Delta and Norwegian workers to offshore rigs after ending the strike, while OPEC member Libya on Sunday lifted force majeure at its Sharara oilfield.
  • Libya’s state-owned National Oil Corp (NOC) on Oct.11 lifted force majeure on Sharara, the country’s top-producing oil field, and restarted pumping as the OPEC producer continues to restore its energy industry following the Libyan National Army’s end of a nine-month blockade in September.
  • NOC received assurances from the Petroleum Facilities Guard, linked to the self-styled LNA (Libyan National Army), that it will end security violations and remove hurdles to allow the national oil company to lift force majeure and resume operations at the field, the company said in a statement.
  • Libya’s total output on Monday was expected to hit 355,000 bpd. A full return of the 300,000 bpd Sharara field would nearly double that.
  • Libya holds Africa’s largest proven reserves of oil and its main light sweet Es Sider and Sharara export crudes yield a large proportion of gasoline and middle distillates, making them popular with refineries in the Mediterranean and Northwest Europe.

Explore Data on the Nairametrics Research Website

Johnson is a risk management professional and banker with unbridled passion for research and writing. He graduated top of the class with B.sc Statistics from the University of Nigeria and an MBA degree with specialization in Finance from Ambrose Alli University Ekpoma, with fellowships from the Association of Enterprise Risk management Professionals(FERP) and Institute of Credit and Collections management of Nigeria (FICCM). He is currently pursuing his PhD in Risk management in one of the top-rated universities in the UK.

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Commodities

Oil gains 15% in February, as Saudi Arabia’s output curbs help

Oil prices rose for a fourth straight month, despite its heavy plunge at the last trading session of the month.

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Crude oil prices, bonny light, 4 key reasons why Brent crude might slip back to $35 per barrel, Crude oil prices resume weekly gains as demand picks up 

Oil prices rose for a fourth straight month, despite their heavy plunge at the last trading session of the month.

British-based oil contract, Brent crude, which is the international benchmark for oil, settled at $64.42, down 3.7% on the day. For the week, it however rallied up by 2.5%. For the month, it was up 15%, extending gains in January, 9% in December, and 27% in November.

  • Brent crude also hit a 13-month high of $66.81 in February. Oil traders will now be looking at the all-important meeting led by the Organization of Petroleum Exporting Countries with allies steered by Russia, which is to meet in the coming days to set output quotas for April.
  • The Saudis had contributed massively in supporting crude oil prices last month when they pledged to make these extra curbs only this month and March, but some see signs that suggest a change in such status quo.

Saudi Arabia, the leading oil producer after the United States, is OPEC’s most important producer as it has proven reserves equivalent to 221.2 times its annual needs. This means that, without Net Exports, there would be about 221 years of oil left.

That said, OPEC has 70% of the world’s proved crude oil reserves. Venezuela leads the title for the highest crude oil reserves with 304 billion barrels, followed by Saudi Arabia with 298 billion barrels.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insightful macros that could weigh on oil prices in the short term.

“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.

“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.

“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking,” Innes stated.

What to expect

Still, oil traders anticipate such corrections are likely to be short-lived given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.

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Commodities

Gold posts worst monthly decline since 2016, as U.S dollar keeps rising

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support.

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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

Gold has of late been under immense pressure, as the Dollar Index surged to a one-week high of 90.8. The safe-haven currency is an outright alternative to gold and typically pressures gold when it gains.

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support at the last trading session of the week, following most commodities and global stocks lower for a second straight day as global investors readjusted their portfolios.

With Friday being the last trading session for the month of February, it wrapped up the month with a 6.6% decline, its worst since a 7.2% decline in November 2016.

 

Gold for April delivery lost about 2.6% to settle at $1,728.80 per ounce. It earlier plunged to $1,715.05, its lowest point since a June 8 bottom of $1,700.10.

For the week, the precious metal contract lost about 2.7% in value, following through with the previous week’s drop of 2.5%.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on other prevailing macros weighing heavily on gold prices

“The rise in real yields has seen gold under pressure with everyone selling. Although positioning is cleaner, the overall market is still long, and ETF selling negatively affects the market on actual position clean out rather than just speculative sell-off. Which is more worryingly an early sign of a capitulation.”

Bottom Line

Gold traders are not keen on going bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.

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