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The Market Today - 02 April 2019

Brent Crude hits year-high price of $69

Yesterday, Brent price touched $69/bbl, its highest price so far in 2019, thanks to sustained oil cuts by OPEC. Reuters’ recent survey showed that the 14-member OPEC pumped 30.40 million barrels per day (bpd) last month, down 280,000 bpd from February. The survey also indicated that OPEC oil supply reached a four-year low in March largely due to Saudi Arabia’s continued dedication to keeping output low, coupled with the continued fall in Venezuelan output after further U.S. sanctions and power outages. OPEC and its allies continue to ignore pressure from President Trump, who again called for OPEC to pump more oil and reduce crude prices. In March, the 11 OPEC members who entered into the supply pact, achieved 135% of pledged cuts, up from 101% in February. The survey also showed that the biggest drop in supply came from Saudi Arabia, OPEC’s biggest producer, which pumped 220,000 bpd less than it did in February. Meanwhile, sources put Venezuelan production in March as low as 650,000 bpd (February output: 1 million bpd) after blackouts halted operations at the country’s main oil export terminal of Jose and at crude upgrading plants.                                               

Market records significant loss to start Q2                                    

The Nigerian bourse kicked off the new quarter on a poor note, shedding 164bps, with all key sectors (led by the Consumer Goods sector) closing in the red. Market breadth remained negative with 11 advances to 19 declines. With portfolio reallocations and rebalancing possibly responsible for the sharp sell-offs at the start of the quarter, we foresee further, but milder, declines in today’s session with the expectation of lower activity levels on the exchange.                                             

Stock Watch: After posting FY’18 results and declaring a final dividend of ₦0.25 (9.2% Div. Yield), CAVERTON rose 884bps on the day, posting the third best performance on the exchange today. This was largely connected to the impressive dividend yield. The stock closed at N2.71, the highest price since May 2018.                                           

OMO pause drives T-bill yields further downwards                                               

In line with its recent, less-hawkish stance, the CBN once again refrained from conducting an OMO auction at week start. Accordingly, the Interbank Call rate declined 486bps to 5.00%. Spurred by the absence of a mop up, the T-bills market traded bullish, with buy interest observed across the space. Overall, yields declined 16bps on average. On the other hand, tepid trading persisted in the bond market, with sentiment staying mixed and yields advancing 9bps on average across benchmark bonds. Given the CBN’s current stance, we do not expect an OMO auction today, and thus foresee continued demand in the T-bills market. Meanwhile we expect another quiet trading session in the bond market.