The Market Today - 27 April 2018
Strong demand to put Oil prices at $65 on average for 2018
The World Bank recently released its April Commodity Markets Outlook and according to Bank, oil prices are expected to average $65/bbl over 2018 and 2019 (2017: $53/bbl). This is on the back of strong demand from consumers and expected moderation in supply - given the success of the Organization for Petroleum Exporting Countries supply cut pact. According to the report, prices for energy commodities are expected to increase by 20% y/y in 2018 – 16% ahead of their October 2017 forecast. The bank’s forecast is hinged upon global growth, stronger demand going forward and continued production restraint by OPEC and non-OPEC producers. However, rising U.S. shale oil output, geopolitical risks in oil producing countries, weaker compliance with the OPEC agreement or outright termination of the pact, rising output from Libya and Nigeria continue to add uncertainty to this outlook. With ytd average oil price hovering around $68/bbl, we highlight that the average $65/bbl for 2018 translates to relatively softer prices for the rest of the year vs. current level of $74/bbl.
Flat close despite Negative sentiment
The Nigerian Stock Exchange closed nearly flat (1bp down) yesterday despite red closes across most key sectors – only the Consumer Goods sector closed positive. Intraday trading was mixed yesterday, albeit with a bearish tilt – evidenced by negative market breadth, and we foresee this bearish bias persisting at today’s open.
Stock Watch: OKOMUOIL released its Q1’18 results, reporting Revenue of ₦7 billion (+25% y/y) and PAT of ₦3 billion (+13% y/y) both ahead of our estimates. The stock gained 497bps in yesterday’s session and currently trades at a five-year high of ₦77.15. It has returned 14% ytd
Mixed trading pervades fixed income market
Amid a ₦227 billion OMO maturity, the CBN conducted an OMO auction – the first in a week – selling ₦227 billion (offer: ₦230 billion) across the 91DTM and 245DTM bills at stop rates of 10.90% and 12.00% (effective yields: 11.20% and 13.05%) respectively. Trading pattern in T-bills market was mixed with yields inching up 9bps on average. Trading in the bond space was likewise mixed with yields trending in opposite directions. With the CBN expected to refrain from any liquidity mop up at week close, we foresee more buying in the fixed income market, particularly at the short end of the curve.
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