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Commodities

Oil prices Up, OPEC+ continue to limit output

Brent crude futures were up 1.1% and priced at $43.21 a barrel and West Texas Intermediate crude was priced at $40.66 a barrel, up by1.32%.

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Saudi, Russia agree to cut oil by 20 million barrel, Further oil production cut required to keep oil price above $40 in 2020 , OPEC + deal to boost Nigeria’s earnings by $2.8 Billion

Oil prices started the first trading week bullish. Oil bulls recouped some losses recorded at the previous session amid high hopes that OPEC+ will continue to limit output in order to curb fears on weaker soft demand, coupled with concerns that the COVID-19 pandemic seems to be out of control.

  • At the early session in Asia, Brent Crude futures were up 1.1% and priced at $43.21 a barrel, while the U.S based oil contract, U.S. West Texas Intermediate crude, for December was priced at $40.66 a barrel – up by 1.32%.

READ: Output cut: Nigeria leads in OPEC non-compliance with 50 unsold cargoes of crude

Both oil benchmarks contracts ticked up by more than 8% last week on high hopes of a COVID-19 vaccine, coupled with strong reports from the Organization of the Petroleum Exporting Countries (OPEC) and their allies including Russia, that it will stick to lower output early next year in order to keep energy prices relatively attractive.

OPEC+, in present terms, has reduced oil output by about 7.7 million barrels per day, with a compliance rate seen at 101% in October, greatly attributed to the Saudi Energy Minister, nicknamed “Oil Sherriff” as he battles oil speculators and keeps wary over oil producers.

READ: U.S dollar up, Currency traders focus on U.S election

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OPEC+ is scheduled to hold its ministerial committee this Tuesday, which could elaborate on changes to oil output quotas when all the ministers meet on Nov. 30 and Dec. 1.

What they are saying

With a well-detailed analysis on the black fossil market, Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the macros oil traders are riding on presently.

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READ: U.S dollar tumble, Currency traders more risk averse

“All the while, oil prices are still riding the vaccine tailwinds supported by OPEC + backstops, as the two sturdy backstops are ruling out of the more worrying demand and price collapse scenarios.

“Last week traders speculated that the US could move into very rigid lockdowns over the holiday season, impacting road fuel demand over Thanksgiving and Christmas, so we are seeing some of those shorts give way at the open, as traders back some of those US lockdown worries and oil is climbing a bit.”

READ: America’s biggest food delivery app, DoorDash seeks for IPO approval

Bottom line

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Oil traders are looking for the same trading patterns this week as last week, where optimism around key resistance levels quickly ebbs to pandemic realities. It is hard to escape the current virus realities when it comes to the prompt oil market prices.

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Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. Featured Financial Market Analysis for a Fortune Global 500 Company. Member of the Chartered Financial Analyst Society. Follow Olumide on Twitter @tokunboadesina or email [email protected]

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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

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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.

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“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.

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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.

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Crude oil prices rebound ease investors’ concerns for Nigeria debt market, How substantial is compliance for the Oil market?, Crude Oil price soars high on new COVID-19 vaccine

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.

READ: Buying signs: Ethereum’s total coin supply held off exchanges continues to rise

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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.”

READ: Newly created accounts for Bitcoin hit highest level since January 2018

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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.

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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.

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Gold surges, Joe biden

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.

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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.

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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.

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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.

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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.

Explore Data on the Nairametrics Research Website

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