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Commodities

COVID-19 vaccines trigger oil prices up

Brent oil futures broke above $44/ barrel and West Texas Intermediate futures gained 0.60% to trade at $41.59/barrel

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oil prices, Saudi Arabia is OPEC's bull, as Oil price tops $70 for first time in 5 months

Crude oil prices rallied impressively higher. Oil bulls are roaring hard on reports showing multiple COVID-19 vaccine makers delivered positive outcomes on their progress.

  • At the time of filing this report, Brent oil futures broke above $44/barrel.
  • West Texas Intermediate futures gained 0.60% to trade at $41.59/barrel.

READ: Gold prices surge past $2,020 due to weaker U.S dollar

Moderna Inc. recently disclosed its candidate mRNA-1273 has considerably greater efficacy and better storage conditions than its arch American rivals, Pfizer Inc. and BioNTech product, BNT162b, raising hopes that the days of COVID-19 pandemic are now numbered.

Such macro is triggering oil bulls to break their old resistance level with oil traders pinning their hopes on a rise in energy demand for 2021.

READ: Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, also attributed the gains seen lately to macros coming from COVID-19 vaccines, triggering more risk-taking.

“It has been a solid start to the week for oil markets, reflecting the vaccine tailwind driving strong risk appetite across all assets.

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READ: Most Nigerian banks may fail stress tests if economic downturn persists

“Although, COVID-19 cases continue to mount, the economic impact at present appears lessened by low desire to return economies to full lockdown – the incoming Biden team indicated as much at the weekend, flagging its preference for targeted measures.

“On the supply side, the Baker Hughes rig count showed a +10 w/w build to 236, continues to advance off the lows but is still very far below the ~400 needed to maintain production in the lower 48. Still, sentiment around the short-term oil price will be determined by COVID-19 demand effects and OPEC+ actions to offset them. At the same time, the longer-term market is a vaccine-driven one.”

READ: Over $500 million dollars worth of Bitcoins withdrawn from BitMEX

Bottom line

It is fair to say that the surprising news coming out from the world-leading COVID-19 vaccine markers viewing through the lens of oil markets, there are good chances of social mobility returning close to the pre-COVID-19 era later in 2021, thereby boosting the already weakened energy demand prevailing around the world.

Explore Data on the Nairametrics Research Website

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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. 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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