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The Market Today - 13 December 2017

North Sea pipeline shut-in drives Brent past $65-mark                                                 

Yesterday, global Brent crude prices rose above $65/bbl for the first time since June 2015 following an outage at the North Sea Forties pipeline, Britain’s largest at 450,000 bpd as a result of cracks discovered on the pipeline. The pipeline produces the popular Forties Brent blend, and its shut-in has raised concerns over temporary supply shortages as repairs are expected to take at least a few weeks. Positively for Nigeria, some European refiners are expected to substitute to similar light sweet crude such as Bonny Light in the meantime. On another note, we anticipate the release of OPEC’s monthly oil market report (due today) which would detail Nigeria’s oil production in November and reveal how close the country is to the OPEC quota of 1.8 mb/d. We recall that OPEC and its partner countries agreed to extend the current oil output agreement until the end of 2018, a move that is expected to support prices through the year.                                                                  

Sideways trading resurfaces on Nigerian bourse                                                             

The Nigerian stock market experienced a mixed trading session as the bourse marginally closed in the green – ASI up 3bps. Sentiment was broadly mixed yesterday, evident in the almost even market breadth and choppy intraday trading. In the absence of significant market catalysts, we foresee similar sideways trading in today’s session.                                                   

Stock Watch: INTBREW has lost 8% over the last six sessions. The stock currently trades at a price of ₦54.98, below consensus target price of ₦58.25 and has returned 197% Ytd.                                                    

T-bill yields head south as demand strengthens                                                              

Yields continued southwards in yesterday’s session as buying sentiment remained evident in the fixed income market. Particularly, yields in the T-bills market declined 128bps on average. Meanwhile, activity in the bond market was muted with yields on benchmark bonds unchanged on average. The DMO is conducting a primary market bond auction today, offering ₦50 billion each on the 5-year and 10-year bonds. We expect the anticipation of lower rates in the near term to spur demand at the auction. The CBN announced yesterday that there will be no primary market auction for T-bills for the rest of the year as it refinances maturing bills with Eurobond proceeds. We expect relatively buoyant liquidity to support further buying across the T-bills space.