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Commodities

Crude oil prices drop over a likely Joe Biden presidency

Brent crude prices closed 3.62% lower to settle at $39.45 a barrel, WTI dropped 4.25% to settle at $37.14/Barrel.

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Crude oil prices record gains after tropical storm hit Gulf of Mexico, The world's biggest oil hedge program underway, crude oil, Nigeria's Crude oil, Bonny light crude oil crashes as Nigeria runs into deeper revenue crisisBonny light crude oil crashes as Nigeria runs into deeper revenue crisis, Brent crude futures gained 0.92%, at $36.08 per barrel, while the U.S. West Texas Intermediate (WTI) crude futures also gained 0.54%, at $33.67 a barrel, Crude oil prices hit $40 per barrel as inventory build-up declines, EIA increases Brent price projection by $2.50 for 2020

Crude Oil prices ended the last trading session on a bearish note.

Oil prices have been under pressure in the last few days, as it seems the most likely winner of the election, Joe Biden, would be in charge of the world’s most important economy. The assumption that his major focus would be on renewables, sent oil prices tanking below $40/barrel.

READ: Oil prices fall as Covid-19 second wave hits Europe, US

What we know

Brent crude prices closed 3.62% lower to settle at $39.45 a barrel. U.S. West Texas Intermediate dropped 4.25% to settle at $37.14 a barrel.

Still, both contracts gained in the week, with Brent up 5.8%, and U.S. crude rising 4.3%.

READ: U.S Government makes biggest crypto grab, worth $1 billion

Also, the rising COVID-19 caseloads across the Northern Hemisphere halted the bull’s track, as oil traders’ fears got strengthened on the bias of lackluster demand and as the U.S election got drawn out over days.

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Europe’s second-largest economy, France disclosed a record number of COVID cases amid efforts in its most recent lockdown measures prevailing at the moment has hence weakened demand for energy in the French Republic.

READ: Increase in local sales drives Wamco Plc revenue to N150.6 billion in 9M 2020

In the U.S. election, Joe Biden took the lead over President Donald Trump in Georgia and Pennsylvania, edging closer to winning the White House as a handful of states continue to count votes, making oil traders halt their long bullish bias.

It also seems likely that the Iranians would have their oil back in an already saturated market under a Joe Biden presidency.

READ: How Cryptocurrency is driving economic growth

In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi gave insights on the prevailing macro, that could weigh in on oil prices in the future. He said:

The oil market weighs the possible impact of more significant restrictions on domestic US oil and gas production from Joe Biden’s presidency versus more support for energy transition and the probability of re-engagement with Iran.”

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READ: Commissioner attributes high cost of rice to increased production cost

The latter seems the most significant risk for the oil price, but it is unlikely that it will be a priority for the first year of a new administration.

By far, the most critical questions for oil are how quickly a Covid-19 vaccine is widely available, whether a US stimulus deal can be achieved in a fractious and uncertain political environment, and how OPEC will respond to demand concerns.

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What to expect

As we head to end yet another roller-coaster week in the analysis of oil trading, one would have to think it is encouraging that OPEC+ continues to signal that the group will do what it can to backstop the oil price, while we wait for the demand outlook to improve.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Message Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Commodities

Lagos Commodities Exchange to start gold trading

The move is in support of the Federal Government’s effort to reduce dependence on oil, diversify the economy and boost the country’s foreign exchange earnings.

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Nigeria's first gold refinery to provide over 500,000 jobs

The Lagos Commodities and Futures Exchange has concluded plans to commence trading of gold with the admission of Dukia Gold’s diversified financial instruments, backed by gold as the underlying asset.

The move is in support of the Federal Government’s effort to reduce dependence on oil, diversify the economy and boost the country’s foreign exchange earnings.

Dukia Gold said the financial instruments, which would be in form of exchange-traded notes, commercial papers and other gold-backed securities would enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the government to diversify external reserves and create jobs across the metal production value chain.

While making the disclosure, during a Pre-Listing media interactive session in Lagos on Thursday, the Chairman of Dukia Gold, Mr Tunde Fagbemi, applauded the Ministry of Mines and Steel Development and the Security and Exchange Commission (SEC) for supporting trading of gold in Nigeria.

What the Chairman of Dukia Gold is saying

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us to facilitate our infrastructure development, expand capacity and create fungible products.

This has the potential to shore up Nigeria’s foreign reserve and create an alternative window for the preservation of pension funds. Gold-backed security is a hedge against inflation and convenient preservation of capital.”

Fagbemi pointed out that the company has refinery services to smelt metals with the capacity to meet local and international demand.

Going further, he said, “As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located.’’

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Context of Gold Mining in Nigeria

It can be recalled that the Federal Government, in June 2020, commissioned the operations of Dukia Gold and Precious Metals Project (DGPMP). The project is expected to enable Nigeria to mine its gold reserves properly, trade responsibly and refine locally.

The Vice President, Prof. Yemi Osinbajo, while performing the virtual commissioning of the project, said Nigeria has potential reserves of 200 million ounces of gold reserves.

Osinbajo said that he believed that the Dukia gold project would encourage the emergence of smaller-scale mining companies which, for the first time, would have a transparent and welcoming market for their mined gold and precious metals.

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Commodities

Oil prices surge over China’s growing appetite for energy

British based contract ticked up by 0.3% to trade at $63.59 a barrel while the WTI futures edged near $60 a barrel.

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Where next for oil prices?, Brent crude futures gained 0.14 to trade at $34.70 at the time this report was drafted, recovering some of its losses earlier in the oil trading session. , Brent crude price fails to remain over $40, concerns over pledge cut strengthens

Oil prices rallied high at the second trading session of the week as data from the world’s second-largest oil consumer’s (China) import growth picked up coupled with rising tensions in the Middle East after rebels from Yemen disclosed that they fired missiles on Saudi’s energy infrastructure.

At the time of writing this report, the British based contract ticked up by 0.3% to trade at $63.59 a barrel while the West Texas Intermediate futures edged near $60 a barrel.

READ: Oil prices soar above $70 a barrel over terrorist attacks on Saudi’s oil station

The world’s second-largest economy recorded impressive gains for last month in yet another boost to China’s economic recovery as global demand gained momentum. Crude oil imports into China surged by 21% in March from a low base of comparison a year earlier.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the parabolic of the energy market, as oil traders seem to be uninspired on the resurging COVID-19 virus;

“The oil market’s magnetic attraction to the $63 level should tell us much about the near-term outlook amid conflicting signal of new Covid waves coming to shore ahead of what should be a summer gasoline buying bonanza.

READ: Did OPEC+ April fool the oil market?

But overall, this is an oil market that feels completely uninspired outside of a few micro lurches here and there.

Still, positive comments on the US economy from Fed Chairman Powell help to reassure the outlook for oil demand, balancing concerns about the continued spread of Covid-19 in some regions.”

What to expect

Recent price actions suggest oil traders might hold the $60 a barrel baseline in the near term even if U.S Treasury yields surge while struggling to resolve with what form and fashion the next leg of the reflation trade will take.

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