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Breakfast Report - 3 June, 2019

The price of dated Brent Crude fell 13% m/m in May, as concerns over the Washington-Beijing trade war intensified during the month. While OPEC cuts and U.S. sanctions on Iran drove Brent price to a year high of $75/bbl in April, recent escalation in trade hurdles between U.S and China parties dampened sentiment in the oil market. Specifically, the trade rivalry between Washington and Beijing has precipitated fears of slowing oil demand through the rest of the year; consequently, Brent price has slumped 19% from its year high to $61/bbl. Meanwhile, U.S. shale output continues to record steady growth, with the latest EIA Weekly Petroleum Status Report revealing that U.S. crude output rose 100 kb/d to 12.3 mb/d. In the second half of the year, we expect rising U.S. shale production to weigh heavily on crude prices. As such, we expect OPEC and its allies to reach an agreement in June to extend the existing cuts through H2’19. 

 • Equity: While sentiment in the first half of May was bearish, trading took a bullish turn after the MTNN listing mid-month. We expect June to begin on a mixed note, picking up where it left off, as sentiment surrounding the biggest catalyst so far this year, MTNN, continues to wane.            

• Stock Watch: MANSARD rose 10.00% on Friday to settle at ₦1.98. The insurance company closed limit up after trading at its year low of ₦1.80 for eleven sessions. The stock has traded as high as ₦2.20 this year and is now 10% below this high. MANSARD has returned 8% YTD compared to a 5% decline for the Insurance sector. 

 • Fixed Income: Rates this week hovered and closed around their opening levels, serving as an indication of mixed sentiment in the market. For the next session, we expect investor sentiment to remain relatively positive with mixed level of activity in both the T-bills and bond space.