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Oil price rises to $40

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images 2020 09 16T164201.313 Oil price rises to $40

Oil prices rose more than two per cent on Tuesday , supported by hurricane supply disruptions in the United States , but demand concerns loomed as energy industry forecasters predicted a slower- than – expected recovery from the pandemic .
Brent crude gained 92 cents, or 2 .3 per cent , to settle at $40. 53 a barrel , while U . S . West Texas Intermediate crude futures rose $1 .02 , or 2 .7 per cent , to settle at $38. 28 a barrel . Both contracts fell on Monday , according to Reuters .
Futures gained ahead of Hurricane Sally’ s expected landfall on the US Gulf Coast . More than a quarter of US offshore oil and gas production was shut and key exporting ports were closed as the storm’ s trajectory shifted east toward western Alabama , sparing some Gulf Coast refineries from high winds .
“ Harsh weather events in the US cause some unpredictability about its oil production and that ’ s always good news for prices ,” said Bjornar Tonhaugen , Rystad Energy ’ s head of oil markets.
The outlook for oil demand remained weak, capping price gains. The International Energy Agency trimmed its 2020 outlook by 200 , 000 barrels per day to 91 . 7 million bpd, citing caution about the pace of economic recovery.
“ We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved , ” the IEA said in its monthly report .
The agency said commercial oil stocks in the developed world hit an all – time high of 3. 225 billion barrels in July , and cut its forecast for implied stock draws for the second half of the year .
The IEA ’s demand revision aligns with forecasts from major oil industry producers and traders . OPEC downgraded its oil demand forecast and BP said demand might have peaked in 2019 .
World oil demand will tumble by 9. 46 million bpd this year , the Organisation of the Petroleum Exporting Countries said in a monthly report on Monday , more than the 9. 06 million bpd decline OPEC expected a month ago .

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CBN prepares for recession, reduces benchmark lending rate to 11.5%

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images 59 2 CBN prepares for recession, reduces benchmark lending rate to 11.5%

The Central Bank of Nigeria on Tuesday reduced the Monetary Policy Rate by 100 basis points from 12. 5 per cent to 11 . 5 per cent after its two- day Monetary Policy Committee meeting in Abuja.
The 10 members of the committee who were in attendance voted to retain the Cash Reserve Ratio and Liquidity Ratio at 27 .5 per cent and 30 per cent respectively .
The MPC adjusted the asymmetric corridor from +200 /- 500 basis points to +100 /- 700 basis points around the MPR .
The Central Bank Governor , Godwin Emefiele , disclosed these while presenting the communiqué after the meeting.
He said , “ At present , fiscal policy is constrained and so cannot , on its own, lift the economy out of contraction or recession given the paucity of funds arising from weak revenue base , current low crude oil prices , lack of fiscal buffers and high burden of debt services . ”
He said the committee expressed deep concern on the continued uptick in inflation for the twelfth consecutive month as headline inflation ( year – on – year ) rose to 13 . 22 per cent in August from 12 .82 per cent in July 2020.
“ The increase in headline inflation was largely driven by the persistent increase in the food component, which rose to 16 per cent in August 2020 from 15 .48 per cent in July 2020, ” he said .
Emefiele said the committee stressed the urgent need for a combination of broad – based monetary and fiscal policy measures to curb the rise in inflation and contraction in output growth .
Explaining further , he said , “ In the light of this , reducing MPR will signal to the Deposit Money Banks to lend more to stimulate growth , increase aggregate supply , which should dampen prices in the immediate term .”
Emefiele said , “ The MPC was, at this meeting , confronted by policy dilemma .
“ Whereas MPC believes in the primacy of its price and monetary stability mandate, it nevertheless was confronted with what policy direction to focus on, given the contraction in output growth during the second quarter of 2020, which may lead to a recession, if the third quarter of 2020 output growth numbers further show a contraction .
“ It is , therefore , of the view that , if a recession occurs in Q3 , the committee would be confronted with proposing policy options in a period of stagflation . ”
“ The committee also noted the rising public debt profile and urged the fiscal authority to strengthen its debt management strategy , explore other sources of revenue , as well as enhance efficiency in public expenditure ,” he added.
Financial experts, however, differ on the reduction in the MPR .
The Director – General , Lagos Chamber of Commerce and Industry , Dr Muda Yusuf , said , “ The adjustment of the MPR by 100 basis points from 12 .5 per cent to 11. 5 per cent by the MPC was a surprise .
“ My expectation was that the status quo would be maintained.
“ Rates were already generally low in the money market . In fact , concerns were being expressed about the fact the real savings and deposits rate were negative.
“ But , I do not believe it would have any material impact on lending rates .”
A former President , Association of National Accountants of Nigeria , Dr Sam Nzekwe , praised the CBN for the reduction in the lending rate.
He said , “ That is a good development and it shows they are beginning to listen to what we are saying because some of us have always said the interest rates should come down. ”
Professor of capital market , Nasarawa State University , Prof . Uche Uwaleke , said , “ I expected the MPC to maintain the status quo , to hold the rates because of the spike in inflation that we witnessed last month .”
He added that the inflationary pressure and the pump price of fuel which was recently increased would exert more pressure on inflation .

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CBN reduces benchmark lending rate to 11.5%

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images 59 2 CBN reduces benchmark lending rate to 11.5%

The Central Bank of Nigeria on Tuesday reduced the Monetary Policy Rate from 12. 5 per cent to 11 . 5 per cent after the two – day Monetary Policy Committee Meeting in Abuja.
The committee also voted to retain the Cash Reserve Ratio and Liquidity Ratio at 27 .5 per cent and 30 per cent respectively .
The Central Bank Governor , Godwin Emefiele, disclosed this while presenting the communiqué after the meeting.
Details later …

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Bearish sentiment strengthen at NSE amid weakening economic indices

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images 30 3 Bearish sentiment strengthen at NSE amid weakening economic indices

Nigeria’s stock market again closed lower for the second consecutive week with the trading pattern and negative sentiments revealing selloffs in banking stocks, which pulled down the NSE market capitalisation down by N14 billion week-on-week (w-o-w).

The negative performance was down to profit taking in the shares of Zenith Bank, Stanbic, Ecobank Transnational Incorporated (ETI) and FBN Holdings. This led to the All Share Index (ASI) falling by 0.08 per cent to 25,572.57 points.

Consequently, the Month-to-Date (MtD) gain declined to 1.0 per cent, while the Year-to-Date (YtD) loss increased to -4.7 per cent.

Performance across sectors was mixed although positively skewed as three of six indices trended northward. The Industrial Goods index led gainers, up 0.5 per cent w/w on the back of bargain hunting in CAP (+8.6 per cent). Trailing, the Consumer Goods and Insurance indices rose 0.1 per cent and 0.01 per cent w/w respectively due to price appreciation in Nigeria Breweries (+2.3 per cent) and Wapic (+12.1 per cent).

Conversely, the Oil & Gas index led losers, down 1.0 per cent w-o-w following sell-offs in Oando (-4.2 per cent)while price depreciation in FCMB (-6.4 per cent) dragged performance in the Banking index by 0.7 per cent w-o-w. Finally, the AFR-ICT index closed flat. Reacting to the market performance, analysts who spoke to Daily Sun, attributed the downturn to the weak macroeconomic state of the nation and added that profit taking is likely to persist as the month of September progresses in the midst of profit booking, mismatch of economic policies and negative macroeconomic indices.

This is coming on the back of persistent pressure on consumer prices in August 2020 as headline inflation rose to 13.2 per cent year-on-year (y-o-y) from 12.8 per cent in July, according to the Consumer Price Index (CPI) report published by the National Bureau of Statistics (NBS).

Investigations by Daily Sun show that this is the 12th consecutive rise in inflation and the highest level since March 2018 while the sharp increase in headline inflation was driven by a faster m/m inflation, which was up 10 basis points to 1.3 per cent, the highest since June 2017.

Chief Operating Officer, Ambrose Omordion, explained that the August inflation data came worse than expected at 13.22 per cent, thereby deepening the negative returns of many investment windows. Omordion noted that mixed (positive and negative) sentiments would continue to dominate the market as the month of September progresses in the midst of profit booking, mismatch of economic policies and negative macroeconomic indices.

According to him, this is against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation, negative Q2 GDP of 6.1 per cent and unstable economic outlook for the rest of 2020 as government and its economic managers are going front and back with mismatch polices and implementation.

“Also, investors and traders are positioning amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend. We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 earnings and dividend on the strength of their earnings capacity as the year last quarter is at the corner.

Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year”, He said.

For their part, Cordros Capital, said, “In the absence of a positive catalyst, and given the still uninspiring macro story, we guide investors to trade cautiously in the short term. However, we expect the market might benefit over the longer term on compelling valuations and as investors seek alpha-yielding opportunities in the face of negative real returns in the fixed income market”.

Meanwhile, a total turnover of 1.139 billion shares worth N12.692 billion in 17,109 deals were traded by investors, in contrast to a total of 1.226 billion shares valued at N10.842 billion that exchanged hands last week in 19,529 deals.

The Financial Services industry (measured by volume) led the activity chart with 870.300 million shares valued at N7.863 billion traded in 9,427 deals; thus contributing 76.43 and 61.95 per cent to the total equity turnover volume and value respectively.

The Industrial Goods industry followed with 62.689 million shares worth N1.162 billion in 1,557 deals while the ICT industry recorded a turnover of 50.859 million shares worth N2.552 billion in 619 deals. Trading in the top three equities namely FBN Holdings Plc, Guaranty Trust Bank Plc and Access Bank Plc. (measured by volume) accounted for 353.048 million shares worth N4.018 billion in 3,095 deals, contributing 31.00 and 31.66 per cent to the total equity turnover volume and value respectively.

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