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The Market Today - 13 July 2017

OPEC oil production rises to 32.6 million bpd in June                                     

The Organization of Petroleum Exporting Countries (OPEC) Monthly Oil Market report (MOMR) for July showed that the group’s production rose by an average of 400,000 (barrels per day) bpd to 32.6 million bpd in June, the highest monthly average so far in 2017. Most of the production increase came from African OPEC members, with Libya (+127,000 bpd), Nigeria (+96,000 bpd), and Angola (+66,000 bpd) accounting for nearly three-quarters of the increase. Notably, Saudi Arabia, the most compliant OPEC member so far this year, increased production by 51,000 bpd but still met its target output cut for the month. We see oil production rising further in the coming months as Libya and Nigeria continue to recover production to previous levels. However, this may be addressed by an output cap on the two countries, a possibility raised by several OPEC oil ministers. Meanwhile, Nigeria’s Minister of State for Petroleum, Dr. Ibe Kachikwu suggested that the country would support an output cap around their current OPEC quota (c.1.8 million bpd) once they are sure that production is stable. This will give Nigeria room to expand production by about 100,000 bpd more than current OPEC-recorded levels                                   

Nigerian bourse retains positive sentiment at mid-week                                         

Sustaining positive momentum for the fifth straight session, the Nigerian equity market booked another green close at mid-week with the ASI gaining 47bps. Regardless of tepid trading activity in recent sessions as indicated by the value traded (10-day average: ₦2.7 billion vs. 30-day average: ₦4.0 billion), we expect another green close today as market demand remains strong across key counters.                                 

Stock Watch: Investors reacted negatively to the release of UCAP’s H1’17 result, with the stock shedding 729bps in yesterday’s session to close at ₦3.05. The H1’17 results showed a 4% decline in profit from continuing operations however total profit for the period declined 44% to ₦2.0 billion.                              

Bullish sentiment surfaces in T-bills space                                           

The T-bills market turned bullish yesterday with yields moderating 19bps on average across board. Though still relatively quiet amidst the auction, trading in the bond market turned mixed. Despite the DMO underselling on the 5-yr and 10-yr bond, we expect mixed trading to persist in the bond market as investor appetite remains generally slim across those tenors.  Also, we expect bullish trading in the T-bills market given the liquidity boost from today’s ₦90 billion OMO maturity.   However, we expect bullish trading in the T-bills market given the liquidity boost from today’s ₦90 billion OMO maturity.