FREE

The Market Today - 22 November 2018

U.S. shale production boost spells trouble for OPEC                                                      

With crude prices continuing the worrying slide seen throughout October, the threat of a continued ramp up in U.S. oil production could drive prices down further. Notably, WTI Crude hit $54.58/bbl, as ongoing fears of a precarious trade climate and the potential impact on global economic growth continues to fuel bearish sentiment. Meanwhile, U.S. shale producers are gearing up for an increase in overall capacity in 2019, as three new pipelines – the Cactus II, Enterprise and EPIC – are set to come online. We recall that the Saudi oil minister earlier this month mentioned the need for OPEC to reduce supply by about 1 mb/d in 2019 to account for the increase in U.S. production, as lower output from Venezuela and Iran were not enough to offset the supply boost. We foresee continued volatility in oil prices leading up to 2019, with a continued tilt towards the downside given notable headwinds in the supply-demand dynamics.                                                           

Notable losses across key sectors drag ASI lower                                                            

Following two trading sessions of green closes, the NSE All Share Index turned negative yesterday, losing 78bps on the back of losses in Industrial Goods and Banking sectors.  arket breadth turned negative with 9 advances and 22 declines. With weak investor apathy persisting, we do not foresee any changes in market sentiment and expect a negative trading session today.                                                        

Stock Watch: Following 8 straight sessions with no movement, PRESTIGE has advanced for three consecutive sessions and is currently trading at a year-high of ₦0.67. Having gained 986bps yesterday, the stock now trades 34% above its year-open price.                                                             

DMO undersells at November bond auction                                                      

The DMO conducted a bond auction yesterday, selling ₦39.52 billion (₦115 billion offered) across the 5-year, 7-year and 10-year tenors at 15.20%, 15.50% and 15.83% respectively. Following an improvement in market liquidity to c.₦110 billion, the interbank call rate declined 50bps to close at 9.67%. Yields remained sticky around previous levels in yesterday’s trading session amid continued mixed trading across the fixed income market.  We expect another quiet trading session today in anticipation of outcomes from the conclusion of the MPC’s two-day meeting.