Culled—Proshare

September 26, 2016/fdc

Domestic commodity prices continue to tick upwards in spite of the expected harvests in October. The incessant rains and weakening naira are the major factors pushing the price level.

The US Fed’s decision to hold rates has weakened the US dollar and propelled higher oil prices. The good news is that Forcados terminal is expected to resume loading early October, seven months after a force majeure was declared on this facility on the 22nd of February, 2016.

The attached slides sum up the events that took place in the domestic and global commodity markets this week.

Burning Economic Issues

• MPC maintains status quo on stance

• Marginal dip in 182 days and 364days T/bills stop rates

• Indicating directional movement

• Nigeria’s aggregate debt level up by N4.17trn to N16.3trn

• External debt – $11.26bn, Domestic debt – $50.18bn

• US Fed leaves rates on hold

Impact on Commodity Prices

• Commodities prices yet to respond

• Naira loses more at parallel market rate – N428/$

• Also Interbank fell to N310.58/$

• Kaduna government to establish US$120m potato processing plant

• Sugar prices to increase on rising global benchmarks

Domestic Commodity Prices

Stock Market

•NSE ASI declined by 1.25% to close at 28,207pts

•Investors react to MPC decision to maintain status quo

Oil Prices

• Brent crude 2.81% to $47.24pb

• WTI 5.70% to $45.77pb

• Oil futures rose as EIA reported a drawdown in crude inventories

• US crude inventories fell by 6.2mb to 504.6mb

• Gasoline stocks fell by 3.2mb

• Against analyst’s expectation of a 3.4mb build up

Outlook

• Lower inventory levels suggests a decline in US production

• Prices expected to edge higher as OPEC meeting in Algeria approaches

• Feds decision to maintain status quo is bullish for oil

• Weaker dollar will improve demand for crude futures

Grains

• More rain expected in the Midwest region

• If accurate, this will slow down harvest thereby boosting prices

Soft 

SUGAR

• Rally in sugar prices expected to reduce Chinese imports COCOA

• Expectations of weak crop harvest in October bullish for cocoa futures