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The Market Today - 14 November 2017

Oil market rebalancing on track, deal extension a possibility                                                    

Mohammad Barkindo, Secretary-General of the Organization of Petroleum Exporting Countries (OPEC), reiterated that the joint output curb is succeeding at rebalancing the global oil market. This comes straight after OPEC raised its estimates for the amount of crude it would need to produce to meet demand by 0.4 mb/d to 33.4 mb/d in October, nearly 0.8 mb/d above the group’s Q3’17 production. Amid this, OPEC expects global crude stockpiles to diminish quicker than earlier anticipated, but will meet on the 30th of November to agree on the fate of the current output cut post-March 2018. It remains to be seen whether Nigeria would retain its exemption from the agreement at that time, as OPEC data shows the country’s production stabilizing just below 1.8 mb/d (exlc. Condensates). We recall that Nigeria’s State Oil Minister tentatively backed the proposition of Nigeria’s production being capped at 1.9 mb/d (excl. Condensates) once that level is reached. Overall, we see firm producer action from OPEC supporting global oil prices in 2018 – particularly in the first quarter – which would, in turn, buoy Nigeria’s oil earnings.                                                         

DANGCEM lifts Nigerian bourse at week open                                                 

Despite a broadly bearish trading session, the NSE ASI advanced 52bps yesterday, lifted by gains in market heavyweight, DANGCEM. Sparked by sell offs in notable banking names, market sentiment was broadly negative, despite the overall positive close. Considering this, we anticipate a bearish trading pattern in today’s session.                                                   

Stock Watch: : Following release of 9M’17 results showing a jump in PAT from ₦616 million to ₦2.4 billion, LINKASSURE rallied to a five-year high of ₦0.90 at the end of October. Since then, the stock has shed 28% in the past 10 sessions and now trades at ₦0.65, pegging ytd return at  30%.                                                     

Buying persists in fixed income market at week open                                                  

The Central Bank of Nigeria conducted another OMO auction yesterday, offering ₦100 billion and selling c.₦66 billion across the 94DTM and 185DTM bills at stop rates of 16.00% and 17.80% (effective yields: 16.69% and 19.57%) respectively. Trading sentiment remained upbeat in the T-bills market at week open, with buying spread across the space Though trading pattern was mixed in the bond market yesterday, buying was more dominant across the space (particularly on the mid-long end) as investors hunted for bargains across the curve. Given that we expect the CBN to continue with OMO mop-ups, we foresee a relatively quiet trading session today as tightened liquidity constricts demand in the fixed income market.