Crude oil prices recorded impressive gains amid high hopes that leading oil producers will suspend plans on increasing oil supply.
Crude oil prices recorded impressive gains in barely four days, gaining as much as 12% amid high hopes that the world’s leading oil producers will suspend plans on increasing oil supply as soaring cases of COVID-19 onslaughts distort fuel demand.
What you should know
At the time of drafting this report, U.S. West Texas Intermediate (WTI) futures were priced at $41.53 a barrel, while Brent Crude traded at $43.87 a barrel.
- It should be noted that both major oil benchmarks, Brent crude and WTI traded at $39/barrel and $37/Barrel respectively prior to this week’s trading session.
- Crude oil prices are up 12% in barely four days on the macro that such bailout from OPEC would ease pressure on the spiral fall of the black fossil, coupled with the news on Pfizer’s COVID-19 vaccine, gave the bulls enough energy to break above $43/barrel in the case of Brent crude.
- Algeria’s Energy Minister had earlier disclosed yesterday, on OPEC+ would most likely consider extending current production cuts of 7.7 million (BPD) into 2021, or deepen them more if the case arises.
What they are saying
Stephen Innes, Chief Global Market Strategist at Axi, spoke on the present fundamentals pushing crude oil prices to record high amid COVID-19 resurgence.
“At this time, Christmas came early to the producers, where selling was evident, as higher prices invited December hedging. But for those investors chasing the prompt market higher on the vaccine impulse, when they should be getting bulled up on the back end of the curve, they might end up with the proverbial lump of coal in their holiday stocking, as it is the pandemic that counts first before the vaccine, when it comes to the prompt delivery for oil markets. The medical advances are likely to help the economy and oil market normalize through 2021.”
- This represents a 16 kobo drop when compared to the N385.67/$1 that it exchanged for on Tuesday, November 10.
- The opening indicative rate was N385.99 to a dollar on Wednesday. This also represents a 16 kobo drop when compared to the N385.83 that was recorded on Tuesday.
- The N393.43 to a dollar was the highest rate during intra-day trading before it closed at N385.83 to a dollar. It also sold for as low as N381/$1 during intraday trading.
- Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 45.5% on Wednesday, November 11, 2020.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $140.95 million on Tuesday, November 10, 2020, to $205.05 million on Wednesday, November 11, 2020.
- The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
- The increase in dollar supply after the previous trading day’s drop reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
- The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
- Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- A financial expert and Managing Director of Financial Derivatives had stated that he expects the exchange rate at the parallel market to likely depreciate to N470-N475/$1 in November and December due to low oil prices that will further limit foreign exchange supply.