The Market Today - 15 June 2017
Oil prices slide as rising supply weighs
Barely two weeks after the announcement of the OPEC deal extension, oil prices continue to trend downwards, with Brent crude trading at a seven-month low of $46.93/bbl (at time of writing). The sustained downtrend of oil prices has largely been driven by stubbornly rising shale production levels in the U.S. and rebounding production in Libya and Nigeria – two OPEC countries exempt from the output cut agreement. The dampened outlook for crude was further exacerbated by data from the International Energy Agency which forecasted an extension of the supply glut past 2017. We note that while the current price is still ahead of Nigeria’s budget benchmark price ($44.50/bbl), further drops could see it move below the benchmark and threaten oil revenues. Nevertheless, we see rising domestic production – as production volumes at the Forcados terminal reach pre-Force Majeure levels – as a boon for oil revenues.
Key sectors drive ASI rebound at mid-week
Bolstered by strong gains across all key sectors, the Nigerian bourse bounced back at mid-week (NSE ASI: +138bps) erasing memories of earlier losses as the ASI turned green w/w (+97bps). Amidst softer profit taking across sectors and strengthening demand in the market through the day (further indicated by the ASI’s intraday movement) we expect bulls will maintain a grip on the exchange in today’s session.
Stock Watch: MAYBAKER advanced 10.2% yesterday. On June 1, it was reported that the pharmaceutical company had entered a ₦2.6 billion joint venture agreement with the FG for the local production of vaccines to combat meningitis. The stock has risen 54% over a ten-session run since then and currently trades at an over five-year high of ₦3.78. MAYBAKER has returned 302% ytd.
Fixed income market trades bullish amidst PMA
Buoyed by anticipation of a liquidity boost (₦205 billion OMO maturity slated for today), the fixed income market saw an increase in buying sentiment in yesterday’s session. Amidst the PMA, buying sentiment strengthened in the T-bills market at mid-week with yields declining 60bps on average on short-dated bills. With stop rates at the PMA coming in line with general market expectation, we expect the anticipated liquidity boost from OMO maturities to continue to drive market sentiment – particularly in the T-bills space.
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