Commodities
Nigeria’s major export, crude oil posts yearly high
Brent crude futures closed at $62.43 after rising to an intra-daily session high of $62.83, the highest price level since Jan. 22, 2020
Oil prices recorded impressive gains at the last trading session of the week.
Oil prices settled at their highest levels in more than a year on hopes a U.S. stimulus deal will boost the energy demand coupled with strong compliance in output cuts by OPEC+.
Brent crude futures closed at $62.43 after rising to an intra-daily session high of $62.83, the highest price level since Jan. 22, 2020.
READ: Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure
West Texas Intermediate printed a weekly gain of about 4.7% while Brent crude rallied by 5.3% on the week.
Oil traders are virtually going long on macros that show U.S. President Joe Biden is pushing hard for approval of the $1.9 trillion COVID-19 relief plan to bolster economic growth and help millions of its unemployed citizens.
Oil prices are also printing yearly high attributed partly to production curbs from the Saudis’ and leading oil producers, as they try as much possible in supporting prices weakened by the ravaging COVID-19 virus that keeps disrupting the global economy
READ: Oil prices stay firm after reaching highest point in more than 11 months
What you must know: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil for about two-thirds of the world’s traded crude oil, including Nigeria’s crude (Bonny Light, Brass River, Qua Iboe, etc.).
- About 90% of Nigeria’s export earnings coming from crude oil and about 60% of the Federal government revenue is gotten from oil.
- The importance of crude oil can’t be ignored; it is used mainly in fueling aircraft, vehicles, and trucks that facilitate economic lifestyles and activities in the modern world.
- Derivatives from refined crude are used in the production of polymers, as well as the production of waxes, tars asphalts, and lubricants.
READ: IMF explains why economic diversification is important to Nigeria
However, Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics said that it could weigh on oil prices after pulling back some of its gains at Wednesday and Thursday’s trading session;
“After two downward corrections from Brent’s mid $61’s on two consecutive days, it suggests the markets got positioned a bit peaky especially after the IEA delivered a reality check and revised down its global oil demand forecast for 2021 and warned the market recovery is fragile.
“There might be a growing sense that commentary and analysis got slightly too far over its skis as the price corrects upwards even though the data does not suggest a significant change in the near-term outlook. As such the IEA release provided the market with a vital sensibility check.”
What to expect: Oil traders for the midterm will focus their attention on the March 4 OPEC+ meeting as a risk to the current view at a time energy experts expect Saudi Arabia’s unilateral Feb/Mar cuts to be rolled back.
Commodities
Gold breaks below $1,800 per ounce, amid rising U.S Treasury yields
At the time of writing this report, the blinky metal at the futures market was trading at $1,796.40 per ounce.
Gold drifted below the $1,800 price level at the fourth trading session of the week due to higher U.S. Treasury yields. Also, U.S. Federal Reserve Chairman, Jerome Powell, maintained that the current ultra-easy monetary policy paused buying pressure on the yellow metal’s appeal.
At the time of writing this report, the blinky metal at the futures market was trading at $1,796.40 per ounce.
What you need to know: Usually, higher inflation boosts the price of the precious metal in principle, but also helps U.S Treasury yields (gold’s arch-enemy), which in turn helps the opportunity cost of holding the safe haven shinny asset.
READ: Gold suffers its worst January performance since 2011 amid rising U.S dollar
The U.S Fed Chief recommitted to getting the world’s largest economy back to full employment during his testimony before the House Financial Services Committee.
He tried calming fears about inflation in the $20 trillion powered economy, emphasizing that he would only start worrying about it if prices began to rise in an aggressive and troubling way.
Benchmark U.S. Treasury yields are currently at the highest levels in a year.
Stephen Innes, Chief Global Market Strategist at Axi, gave further insights on the political macro condition that could determine the precious metal’s future, at least for the midterm, knowing fully well that gold is priced in the U.S dollar.
READ: Nigeria’s first and largest industrial-scale gold mine set to be completed in first half of 2021
“Gold broke below USD1,800/oz. Such a break below that level this month has done some psychological damage to the market, I believe.
“On the political side, President Biden’s incentives look fully aligned with getting the US economy and populations as healthy as possible ahead of the 2022 mid-term elections.
“If both fiscal and monetary policy makes maximum efforts into a post-pandemic recovery, then at the very least we will get temporary inflation along with plenty of debate whether it might become more permanent.
READ: Gold fast losing the battle to Bitcoin
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.
Commodities
Oil prices drop as gasoline demand from U.S refineries remain poor
Oil prices suffered significant losses at the mid-week trading session in London.
