Culled—Proshare

September 20, 2017/FDC

The naira appreciated to N367/$ at the parallel market, while oil prices hovered around $55pb ahead of the OPEC meeting on Friday.

The possibility of a petroleum workers strike could mean fuel scarcity and higher costs. However, it is likely to be a short-lived action with minimal disruptions.

Burning Economic Issues
·        Oil price at the top end of price spectrum at $55.49pb

·        9.1% above Q2 average

·        OPEC to hold meeting on Sept 22nd to discuss production pact

·        Guidelines for marginal oil fields bidding rounds announced

·        External reserves at $31.88bn

·        Power output up 3.56% (122MW/hr) to 3,543MW/hr

·        Diesel retail price at N180/ltr

·        Naira up N367/$, flat at N485/£

Economic News  

The Good
·        Oil production at 1.86mbpd

·        Production at the upper limit of OPEC cap

The Bad
·        Higher oil production breaching output cap

·        Diesel price is much higher than PMS

·        Driving up logistics & distribution expense

·        Stock market down 0.08% to 34,846.82pts

Power Generation analysis & Impact
On Sept. 14th, average power output dropped to 2310MW

·        Due to partial collapse – Lagos, Osogbo, Kainji, Jebba & Shiriro lost sharply (total load loss = 2,058.6MW)

·        September 17th: Average power output was 3543MWh/hour (up 122MWh/h)

·        Gas constraint was 410MW; frequency management constraint due to loss of DisCo feeders was 2054MW

·        Estimated loss: N1.18bn (annualised at N430.84bn /$1.34bn)

·        High frequency constraints impeding generation output – Alaoji NIPP is shut down

Domestic Commodity Prices Movement

Stock Market 
·        NSE ASI 0.08% to 34,846.82pts

·        7 out of 11 days trading days negative

·        Consumer goods sub index 0.15% to 929.13pts

Oil prices
·        Brent crude 0.02% to $55.49pb

·        Refining post hurricane activity back up

·        US drilling rigs fell sharply by 7 to 749

·        Speculation over possible extension of OPEC led output cut beyond March 2018

·        Compliance amongst OPEC members up 94% in August

·        Demand forecast from IEA & OPEC improved market sentiment

Oil markets today

Outlook – Oil Prices
·        Prices to maintain bullish trend above $55pb

·        Reduced OPEC output and higher compliance levels

·        Shrinking oil glut as demand improves in Europe & US – IEA

Outlook – Agric Prices

Grains
·        Informa Economics expect US farmers to increase wheat & corn acres in 2018

Soft

Sugar

·        Favourable weather conditions will be bearish for prices

Cocoa

·        A bumper harvest expected in Nigeria as favourable rains boosted production