FREE

The Market Today - 15 March 2019

OPEC cuts crude demand forecast once more                                                   

In its March oil market report, the Organization of Petroleum Exporting Countries (OPEC) cut its share of global crude demand forecast for 2019 by 100,000 bpd to c.30.5 million bpd. However, the organization kept its global growth forecast-a major driver of slowing crude demand forecasts-steady at 3.3% for 2019, lower than the IMF’s projection of 3.5%. Meanwhile, data in the March report contradicts claims from the Minister of State for Petroleum Resources, Ibe Kachikwu, that Nigeria had been compliant with the OPEC-directed cuts, with the report stating that Nigeria had produced c.1.74 million bpd in February, exceeding the OPEC-imposed limit of 1.69 million bpd.  With 79% compliance to the OPEC cut agreed in December, Brent crude has appreciated by 28% year to date. The rise in Brent price has been majorly aided by Saudi Arabia’s sustained output cuts, with the oil-rich country shedding a further 86,000 bpd in February. The kingdom also intends to cut exports in April, with Saudi oil minister Khalid Al-Falih saying he favours maintaining the cut into the second half of the year. Overall, we expect OPEC supply cut to provide a cushion for oil prices amidst rising US shale output.                                                      

Recovery short-lived, sell-off resumes to drag ASI                                                         

The Market declined 47bps yesterday after a return of negative sentiment to the bourse, with sell-offs on select Banking and Industrial stocks dragging the ASI. Market breadth remained negative with 9 advances to 18 declines. With weak investor sentiment and low market interest currently driving the tepid activity in the equity space, we foresee further declines at week close.                                                                

Stock Watch: After an 89bps loss in yesterday’s session, ZENITHBANK has shed 11% of its value in the last 5 sessions, settling at a price of ₦22.20. The stock has posted a year-to-date loss of 3.69% and 35% below Consensus target price of ₦34.24.                                                                          

Demand persists in T-bills space despite mop-up                                                           

With ₦212 billion hitting the system yesterday via an OMO maturity, the CBN conducted an OMO auction, mopping up liquidity to the tune of ₦401 billion yesterday (₦350 billion offered), across the 91DTM and 175DTM bills at stop rates of 11.84% and 13.20% (Effective rates: 12.20% and 14.09%) – lower than previous levels.  In the secondary market, yields continued to decline in the T-bills space, with buy-side activity once again observed across mid to long-dated bills. Meanwhile, positive trading was also sustained in the bond space, with average benchmark yields declining 4bps. We anticipate further downward yield adjustments in the T-bills space, driven by the lowered stop rates at yesterday’s OMO. Also, we expect demand on select bonds to drive positive activity today.