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The Market Today - 13 April 2018

OPEC supply reaches lowest point in a year

Helped by reduced supply from Venezuela, Angola and Saudi Arabia, OPEC oil supply dipped from 32.2 mbpd in February to 31.9 mbpd in March, its lowest point since March 2017. The supply restraint shown by OPEC members in recent times has countered surging U.S. shale production and helped support global oil prices. Moving forward, with simmering geopolitical tensions inducing an oil price premium and sturdy global demand to further support the market, we expect Brent crude to maintain its strong performance in the near-term (closed at $72/bbl on Thursday). Moreover, OPEC’s Secretary-General Mohammad Barkindo has stated the cartel’s intention to extend its output agreement into 2019 even if global crude inventories diminish by the end of this year. All of this points to strong oil prices to boost Nigeria’s dollar earnings and federal revenues. 

DANGCEM dip pulls market lower                              

After a mixed trading session, the Nigerian bourse closed mildly lower (ASI down 8bps), dragged by a mid-session drop in DANGCEM. In spite of the negative close, we note that trading pattern was largely varied – evidenced by the mixed closes across counters and nearly-even market breadth. We therefore expect another sideways session today.                  

Stock Watch: Sentiment may have cooled across many tier II banking names, but it appears to be resurgent in STERLNBANK. The bank has risen 17% over the last four sessions and currently trades at ₦1.85. STERLNBANK has returned 71% ytd.                                     

Stop rates fall as CBN resumes OMO auctions                            

With ₦476 billion hitting the system via an OMO maturity, the CBN conducted an OMO auction yesterday, offering and selling ₦500 billion across the 112DTM and 245DTM bills at respective stop rates of 12.20% and 13.99% – significantly lower than previous auction – (effective yields: 12.67% and 15.44%). Meanwhile, yields in the T-bills market continued to move in opposite directions, amidst the OMO auction. However, demand remained strong in the bond market, with yields on benchmark notes moderating 6bps on average. Barring another aggressive mop up from the CBN, we expect yields to fall across the FI market today, in line with the direction of OMO levels.