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COMMODITIES

NNPC recommends downstream sector deregulation

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Deregulation of the downstream sector of the oil and gas industry in Nigeria has been recommended to increase investment in the refining business and facilitate exponential growth in the nation’s refining capacity.

Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, disclosed this at the African Refiners Association Week 2020 which held virtually on Tuesday.

NNPC’s spokesperson, Kennie Onateru, said in a statement that Kyari also called for deeper collaboration among downstream players across the African continent to provide solutions to challenges of substandard fuels.

Kyari said though the idea of price stabilisation which led to the introduction of fuel subsidy in the 1970s was noble, it had grown into a huge financial burden on the nation’s treasury over the years.

He said this necessitated its removal in March.

Kyari said the move would not only free up much-needed cash to fund infrastructural development, but would also eliminate market distortion, foster competition between operators and get more private sector players to build refineries across the country.

He was quoted as saying, “It is important to note at this point that the future of our continent does not just lie in our ability to unlock value from our vast natural resources or powering an industrial and economic revolution, but also in our ability to implement proven refining solutions that consider the broader public health implications of our business decisions.”

He said the NNPC was making concerted efforts to carry out holistic rehabilitation of its refineries in Port Harcourt, Warri and Kaduna.

On his part, the Executive Secretary of ARA, Anibor Kragha, commended the NNPC for its efforts to bolster the continents’ refining capacity.

He said the association along with other stakeholders would support the corporation to achieve its objectives.

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COMMODITIES

Oil prices plunge on fears OPEC+ may increase Oil supply

Oil traders are becoming wary that OPEC+ will increase oil output and further distort the energy demand/supply dynamics.

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Oil prices lost more than a percent at the second trading session of the week. Oil traders are virtually going to extend short on concern that OPEC may agree to increase global supply in a meeting this week and Chinese demand may be dropping.

At the time of writing this report, Brent crude dropped by 1.2%, to trade at $62.91 after losing 1.1% in the past day. U.S. West Texas Intermediate (WTI) crude dropped by 1.2%, to trade at$59.90 a barrel, having lost 1.4% on Monday.

Oil traders are becoming wary that OPEC and its allies, a group often referred to as OPEC+, will increase oil output and further distort the energy demand/supply dynamics.

The group meets is scheduled to hold on Thursday as discussions might include allowing as much as 1.5 million barrels per day of crude oil back into the market.

Stephen Innes, Chief Global Market Strategist at Axi in a note to our source  explained why the OPEC+ meeting matters most to many oil traders.

“Constructive oil market fundamentals have blown slightly off course ahead of the OPEC + meeting on Thursday as oil prices took to the plunge pool overnight, with Brent back to the soft US$63 handle after trading as high as $66.82 only last Thursday.

“Commodities were mostly weak overnight as the dollar regained a bit of ground. OPEC+ will meet this Thursday, and expectations are that despite Saudi Arabia’s call for caution, most members will push for an increase in output,” Innes stated.

Bottom line: energy pundits expect the all-important meeting this week in being one of the most interesting oil meetings in Q1, with Saudi Arabia urging producers to remain “extremely cautious”.

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COMMODITIES

Gold posts worst monthly decline since 2016, as U.S dollar keeps rising

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support.

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Gold has of late been under immense pressure, as the Dollar Index surged to a one-week high of 90.8. The safe-haven currency is an outright alternative to gold and typically pressures gold when it gains.

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support at the last trading session of the week, following most commodities and global stocks lower for a second straight day as global investors readjusted their portfolios.

With Friday being the last trading session for the month of February, it wrapped up the month with a 6.6% decline, its worst since a 7.2% decline in November 2016.

Gold for April delivery lost about 2.6% to settle at $1,728.80 per ounce. It earlier plunged to $1,715.05, its lowest point since a June 8 bottom of $1,700.10.

For the week, the precious metal contract lost about 2.7% in value, following through with the previous week’s drop of 2.5%.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to our source, spoke on other prevailing macros weighing heavily on gold prices

“The rise in real yields has seen gold under pressure with everyone selling. Although positioning is cleaner, the overall market is still long, and ETF selling negatively affects the market on actual position clean out rather than just speculative sell-off. Which is more worryingly an early sign of a capitulation.”

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.

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COMMODITIES

Gold maintains shine after advancing for two days

The bullion asset regained its lustre after a 2.2% drop recorded in the past week,

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Gold stayed on course at the second trading session of the week after advancing for two days, as metal traders awaited testimony from U.S Fed Chief, Jerome Powell.

At the time of drafting this report, the bullion asset traded at $1,807.24 an ounce after rising 1.9% over two days.

The U.S Fed Chief’s semi-annual report at the U.S congress today and the next day will be monitored by metal traders for further policy guidance, and his assessment of the economic recovery at the world’s largest economy.

The bullion asset regained its lustre after a 2.2% drop recorded in the past week, as traders refocus on rising inflation expectations.

In an explanatory note to Our source, Stephen Innes, Chief Global Market Strategist at Axi, gave valuable insights on how the precious metal managed to stay above the $ 1,800-ounce price level.

“It was a strange world seeing the commodity locomotive racing at full steam, but gold left-back at the station. But correlations are looking more normal today after yesterday morning signal gold was trading slightly higher in delayed response to USD weakness. A weaker US dollar remains one of the primary lift-off balloons.

Gold built on Friday’s modest rally, clearing and holding above the USD1,800/oz level. USD weakness was likely the key factor behind gold’s recovery.”

What to expect: The U.S congress may vote on the US$1.9 trillion stimulus package in the coming days, which should hold gold’s appeal as inflation concerns and reflation appeal suggest gold is a good hedge.

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