Nigeria

Agriculture – USDA slashes corn and soybean crop ratings The USDA’s latest crop progress report shows that the USDA trimmed its crop condition ratings for US corn and soybean following dry weather conditions. The USDA rated 55% of the corn crop in good-to-excellent condition as of 18 June, lower than 61% a week ago and 70% seen at the same stage last year. Similarly, the agency rated 54% of the soybean crop in good-to-excellent condition, lower than 59% a week ago and 68% seen at the same stage last year. On the other hand, the USDA rated around 38% of the winter wheat crop in good-to-excellent condition, unchanged from a week ago, and up from 30% seen last year. Weekly data from the European Commission show that soft wheat shipments from the EU reached 30.4mt for the season as of 18 June, up 11% YoY. Morocco, Algeria, and Nigeria were the top destinations for these shipments. Meanwhile, EU corn imports stood at 25.3mt, compared to 16.1mt reported a year ago.

According to the latest study by software company ConsenSys, as many as 92% of people around the world have heard of cryptocurrencies. In a study conducted on a group of 15,158 people in 15 countries, it turned out that despite high awareness, understanding of blockchain technology is much lower.   This proves that digital currencies such as Bitcoin have become a household name. However, only 8% of respondents could confidently say that they knew the general concept of Web3, the decentralized Internet of the future. Although cryptocurrencies and blockchain have gained mainstream awareness, most people do not fully understand what it is all about and need to update their knowledge on the subject. The results of the study show that developing regions of the world show the greatest awareness and interest in cryptocurrencies. Nigeria, South Africa and Brazil lead on this issue. With 99% of Nigerian respondents showing crypto awareness and over 70% correctly defining what blockchain is.     Technical Market Outlook: The BTC/USD pair has made a new swing high at the level of $31,002, but the Doji candlestick pattern was made at the top of the move on the H4 time frame chart. The market reversed and is now back inside the trading range. The intraday technical support is seen at the level of $29,556 and the intraday technical resistance is located at $30,328.   Moreover, the bulls had broken above the technical resistance located at $28,446 and now this level will work as the technical support. The momentum is strong and positive on the H4 time frame chart and on a Daily time frame chart, so the bulls are ready for another wave up. The next target for bulls is still seen at the level of $32,350.  

The Commodities Feed: USD boosts the complex The commodity complex continues to move higher, aided by the weakness seen in the USD since the US CPI release. For oil, supply disruptions have provided a further boost to the market.   Energy – Oil supply disruptions grow Oil continues to move higher thanks to tailwinds from the below consensus CPI report earlier this week along with weakness in the USD. ICE Brent is now trading above US$81/bbl, the highest levels seen since late April. Brent is set for its third consecutive week of gains. It is not just macro factors driving crude at the moment. Chinese trade data for oil was constructive with flows significantly higher year-on-year and also up month-on-month. In addition, there are some renewed supply concerns. Both Libya and Nigeria are seeing disruptions at the moment. In Libya, both the Sharara and El Feel oil fields are in the process of being shut down due to protests spreading in the country. These fields have a combined production capacity of around 370MMbbls/d. Meanwhile in Nigeria, Shell has suspended operations at its Forcados oil terminal due to a possible leak. The terminal was set to ship 220Mbbls/d of crude in July. Combined, these disruptions are significant and will be felt in a market that is already set to tighten. There is also uncertainty over whether we will see reduced appetite for Russian crude oil, given that Urals are now trading above the G7 price cap. Western shipping and insurance services can only be used for crude priced under US$60/bbl. Russia has tried to blunt the impact of the price cap by securing alternative shipping capacity, but only time will tell how successful it has been in doing so. Both the International Energy Agency (IEA) and OPEC released their monthly oil market reports yesterday. The IEA revised lower its demand growth forecasts for 2023 by 220Mbbls/d to 2.2MMbbls/d, which still leaves oil demand this year at record levels. This should also mean that the oil market still tightens up over the second half of 2023. As for 2024, the IEA expects oil demand to grow by 1.1MMbbls/d. OPEC are more bullish on oil demand, revising up their demand growth forecasts for 2023 slightly to 2.44MMbbls/d, whilst for 2024 the group expects oil demand to grow by 2.25MMbbls/d. This is quite aggressive when considering the uncertain macro outlook. In Europe, refined product inventories in the ARA region have declined for the fifth consecutive week, falling by 53kt over the last week to 5.65mt. Gasoline stocks fell by 30kt over the week to 1.34mt, although stocks are still comfortable and well above the 5-year average. However, middle distillates continue to tighten. Jet fuel stocks in ARA fell by 20kt to 730kt, which is the lowest level seen at this stage of the year since 2018. Meanwhile, gasoil inventories fell by 29kt over the week to 1.93mt, which is around 371kt below the 5-year average. These draws continue to offer good support to the gasoil market, with the crack remaining above US$20/bbl whilst the prompt time spread remains in backwardation.

Output cuts and inflation data continue to boost crude prices Temporary disruptions could add to the bullishness Potential resistance around $83-$84   Oil is trading relatively flat today but has made tremendous gains over the last couple of weeks and could still add to that over the coming sessions. The price has risen more than 13% from the lows on 28 June and, despite appearing to struggle at times yesterday, still has plenty of momentum. The break above $80 was very significant after multiple efforts by Saudi Arabia and its allies to manipulate the price to more sustainable levels, from their perspective. Temporary output disruptions, like those currently in Libya and Nigeria, could further lift prices in the short term as potential tightness in the market on the back of cuts and economic resilience boost demand.   Key Resistance Lies Ahead Brent could face an interesting test around $83-$84 if it keeps rallying, with the boost from US inflation data and Saudi/Russian cuts potentially giving it an additional boost, as well as the psychological lift from this week’s breakout.     The 200/233-day simple moving average has been a key zone of support and resistance previously and could prove to be so again. It hasn’t traded above here in more than a year so a break above would be significant. A move lower could draw attention back to $80 and whether we’ll get that confirmation of the initial breakout. A move below here wouldn’t necessarily be a particularly bearish move, with the 55/89-day SMA band around $76-$78 arguably more important, falling around the upper end of the descending channel. It could also fall around a key fib level depending where the price peaks first.       

The Commodities Feed: China’s GDP falls short The complex has come under pressure this morning following China’s second quarter GDP data, which came in below market expectations. The data will do little to ease concerns over the Chinese economy.   Energy – China data weighs on oil Oil’s venture above US$80/bbl was relatively short-lived, with Brent settling below this level at the end of last week. Downward pressure has continued during early morning trading today following weaker than expected Chinese GDP data. A slight recovery in the USD has also put some pressure on oil whilst supply concerns have also eased, with both the Sharara and El Feel oil fields in Libya reportedly resuming after a brief shutdown last week due to protests. However, it appears as though loadings at Shell’s Forcados oil terminal in Nigeria remain halted after a possible leak was discovered last week. The terminal was set to ship 220Mbbls/d in July. This follows a number of other recent supply disruptions in the oil market, including Kazakh output being affected by power issues and Mexican output bieing hit by a platform explosion, whilst the market is still awaiting the resumption of Kurdish oil flows via the Ceyhan terminal in Turkey. Speculators increased their net long in ICE Brent over the last reporting week, buying 48,123 lots to leave them with a net long of 233,029 lots as of last Tuesday. This is the largest net long speculators have held since April. However, the current speculative long is likely to be somewhat larger, given that this data will not include the post-US CPI rally. The Commitment of Traders report also shows that producers appear to have taken advantage of the more recent strength by selling into the rally, with the producer gross short increasing by 34,930 lots over the last reporting week. The latest rig count data from Baker Hughes shows that the number of active US oil rigs continues to trend lower. The oil rig count fell by 3 over the last week to 537, which is the fifth consecutive week of declines. The number of active rigs has fallen from a year-to-date peak of 623 in mid-January. Whilst up over the last week, Primary Vision’s frac spread count does suggest that completion activity in the US has plateaued over the last few months. China released its second quarter GDP numbers this morning, which showed that GDP grew 6.3% year-on-year, falling short of market estimates of 7.1%. Even so, quarter-on-quarter GDP numbers came in line with consensus at 0.8%. June industrial production came in above expectations at 4.4% YoY, whilst retail sales in June slowed to 3.1% YoY from 12.7% previously, which was also below expectations of 3.3%. The weaker than expected GDP numbers are likely to continue to cause concern for markets. Digging a little deeper into industrial output numbers shows that apparent domestic oil demand was strong over June, coming in at 14.86MMbbls/d, up 13.6% YoY and 1.4% MoM. However, the oil market clearly seems focused on weak headline numbers.

The Commodities Feed: Tight supplies lift oil prices OPEC oil output dropped by around 0.9MMbbls/d in July due to production cuts from Saudi Arabia and Nigeria. Meanwhile, the American Petroleum Institute (API) reported the biggest weekly drop in oil inventory in years.   Energy – OPEC crude output falls The oil market edged higher this morning with prices of both ICE Brent and NYMEX WTI gaining more than 1% day-on-day, following a bullish inventory report from the API and lower OPEC output in July. The API reported that US crude oil inventories decreased by 15.4MMbbls over the last week, significantly higher than the market expectations of around 1.4MMbbls. If confirmed by the Energy Information Administration's (EIA) report later today, this will be the largest weekly inventory drawdown since 1982. Cushing crude oil stocks are reported to have decreased by 1.8MMbbls. On the products side, API reported that gasoline and distillates inventories fell by 1.7MMbbls and 0.5MMbbls respectively, over the week ending 28 July. Meanwhile, preliminary OPEC production numbers for July are starting to come through and it is no surprise that the group reduced output over the month as some members agreed to implement voluntary production cuts. According to a Bloomberg survey, OPEC output declined by 0.9MMbbls/d month-on-month to 27.8MMbbls/d last month, the lowest since 2020. Saudi Arabia led the decline with its production falling by 810Mbbls/d to 9.15MMbbls/d followed by Nigeria trimming the output by 130Mbbls/d to 1.26MMbbls/d. Production in Libya also declined by 50Mbbls/d to 1.1MMbbls/d as a protest briefly disrupted production at its Sharara oil field. The output cuts were partially offset by recovering production in Iraq (+70Mbbls/d), Angola (+40Mbbls/d) and the UAE (+20Mbbls/d). On the products side, recent reports suggest that Petroleos Mexicanos shut down the nation’s largest oil-exporting terminal following an operational issue. Bloomberg reported that the FPSO Yúum K’ak’ Náab in the Gulf of Mexico was shut on Sunday because of a crude leak in one of its hose trains. Prior to this, Pemex halted its Salina Cruz terminal last month following a fire incident and unfavourable weather conditions. The export disruptions from Mexico could help increase demand for the US refined products in the domestic market in the short term.

Agriculture – EU's wheat exports remain soft In its latest report, the European Commission revealed that the EU’s soft wheat exports for the ongoing season stood at 2.92mt as of 6 August, down by 16% compared to 3.48mt reported in a similar period a year ago. The major destinations for these shipments were Morocco, Algeria, and Nigeria. The commission added that the nation's corn imports stood at 1.39mt, down 33% compared to a year ago. Cocoa has been trading volatile recently as the weather conditions in the major cocoa-producing countries in West Africa remain uncertain, especially given the current growing season. The weather has turned favourable in some of the countries including Ghana, Ivory Coast and Cameroon with dissipating rains and increasing sunshine which could help the plants to grow and control the diseases. Nigeria witnessed some heavy showers towards the end of July that increased supply risks and supported prices.

The Commodities Feed: China macro data disappoints The complex came under some pressure due to USD strength yesterday, and renewed concerns over the Chinese economy certainly won’t help.   Energy - Chinese refiners increase run rates The oil market traded in a fairly choppy manner yesterday, with ICE Brent trading slightly above US$1.20/bbl. China concerns and a stronger USD ensured some downward pressure not just for oil, but the broader commodities complex. Chinese data out this morning is unlikely to help soothe concerns, with both industrial production and retail sales coming in below expectations. Industrial production increased 3.7% YoY in July, compared to expectations of 4.3%, whilst retail sales grew by just 2.5% YoY, well below expectations of 4%. Oil-specific data from China was more supportive though, with it showing that refiners processed around 14.93MMbbls/d of crude oil in July, up more than 31% YoY and also higher than the 14.89MMbbls/d processed in June. Our numbers suggest that this is the second highest number on record, with a record 14.94MMbbls/d processed in March this year. In addition, apparent oil demand came in at about 14.76MMbbls/d, up more than 35% YoY, but less than 1% lower MoM. The numbers also suggest that China drew down crude oil inventories by a little more than 500Mbbls/d over July, this is after fairly strong builds in both May and June. Shell finally resumed crude oil exports from the Forcados terminal in Nigeriaon Sunday. Operations at the terminal were suspended for a little over a month following the discovery of leaks. The terminal had been scheduled to ship in the region of 220Mbbls/d in recent months. The resumption of these flows will do little to help the tightness in the medium sour crude market, given that Forcados crude is a medium sweet crude. There is some optimism that a deal between the US and Iran on the release of 4 US citizens from an Iranian prison and the expected unfreezing of Iranian funds overseas could potentially lead to some progress with the Iranian nuclear deal. The failure to reach a nuclear deal on a number of occasions in recent years leaves us reluctant to assume a significant increase in Iranian oil supply. Even with current sanctions, Iran has increased supply from an average of around 2.5MMbbls/d in 2022 to a little more than 2.8MMbbls/d in July 2023. Prior to the re-implementation of US sanctions, Iran was producing in the region of 3.8MMbbls/d. The EIA released its latest drilling productivity report yesterday in which it estimated that US shale oil production will fall by 20Mbbls/d to 9.415MMbbls/d in September. The slowdown shouldn’t come as too much of a surprise given the decline in drilling activity for much of this year. Meanwhile, the number of drilled but uncompleted wells (DUCs) fell by 5 over July to 4,787- the lowest number since April 2014. Whilst well completions did increase MoM, drilled wells also fell over the course of the month.

The challenge to the dollar The war in Ukraine and freezing of Russian FX reserves in 2022 have prompted much discussion on the ‘weaponisation’ of the dollar, the splintering of geopolitical blocs and ultimately the “inexorable” decline in the use of the dollar – or ‘de-dollarisation’. An integral part of this debate will not only be how those geopolitical groupings develop, but also whether other currencies can challenge the dollar’s international role. We suspect the subject of de-dollarisation might gain some traction this summer when senior leaders of the BRICS nations meet in South Africa on 22-24 August. At the top of the summit’s agenda is the proposed expansion of this geopolitical grouping and perhaps some proposals relating to a common payment system in BRICS currencies. Regarding BRICS expansion, speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade. The focus here tends to be on countries that have already joined the BRICS-sponsored New Development Bank (NDB). These include countries such as the United Arab Emirates, Egypt, and Bangladesh.   The proponents for accelerated change argue that some of the major oil exporters like Saudi Arabia, Iran and Nigeria might be included, too. Experts, however, warn that friction between China - a proponent of expansion - and the more reticent India make the subject highly uncertain. Why this is important to the de-dollarisation debate is that the speed of expansion in BRICS could well determine the speed with which this bloc adopts commercial and financial systems outside of the dollar sphere. There are also suggestions that this summit could re-introduce the subject of a BRICS currency. Far from abandoning their own national currencies, we presume this venture could be pursued along the lines of a new ‘Unit of Account’ – similar to the IMF’s Special Drawing Rights (SDR). For example, the NDB or other commerce being conducted in ‘BRICS’ could require users to hold more of these currencies and potentially gravitate away from the dollar.   The link to de-dollarisation here is that the creation of a BRICS unit of account could increase these currencies’ shares in FX reserves of BRICS users – in the same way that China’s 2015 entry into the SDR basket was meant to increase interest in the renminbi. Away from the speculation over the future of BRICS, our article examines evidence of dedollarisation seen so far. There are a whole host of scholarly articles on this subject and perhaps one of the best definitions of what makes an international currency is outlined in Figure 1. Here, the function of an international currency is assessed through the prisms of both the public and private sectors.  

Agriculture – Supply concerns from Africa push cocoa higher Cocoa prices made strong gains during August as supply concerns from West Africa continued to keep the market tight. London cocoa front-month contract settled at a fresh five-year high of GBP2,944/t yesterday. The weather has improved in recent weeks in West Africa including Nigeria, Ghana and Ivory Coast; however, crop development remains poor due to multiple factors including swollen-shoot disease and a supply shortage of fertilisers. Meanwhile, cocoa demand has been increasing in the US and Europe ahead of the winter and Christmas holidays.

The Commodities Feed: It's all about the yields The ‘higher-for-longer’ narrative for rates is pressuring the commodities complex, while the accompanying USD strength is adding further pressure.   Energy - Steady OPEC output The oil market struggled yesterday. ICE Brent settled a little more than 1.6% lower on the day as rising treasury yields and USD strength proved to be too much of an obstacle for the market. Technically, the Brent December contract still needs to fill the gap left following the November contract expiry on Friday. If that happens, it would take the front-month contract back above US$95/bbl. Preliminary OPEC production data for September is starting to come through. The Bloomberg survey showed that output increased by 50Mbbls/d MoM to 27.97MMbbls/d. Nigeria showed the largest increase over the month. Their supply grew by 60Mbbls/d, while Iran saw a marginal pullback in output of 50Mbbls/d. Output is likely to remain relatively steady over October. Further out, the market will be focused on any sign that Saudi Arabia is starting to unwind its voluntary additional supply cuts. There was a bit more noise yesterday around the resumption of Northern Iraqi oil flows through the Ceyhan pipeline. Turkey has said that flows could resume this week. However Iraqi officials have thrown cold water on the idea, saying that there are still some issues that need to be resolved before this can happen. The pipeline can carry almost 500Mbbls/d of crude oil from the Kurdish region to the Ceyhan export terminal. Flows were suspended back in March after the Iraqi government won an international arbitration ruling, stating that these flows were occurring without approval from the Iraqi government Metals - Gold plunges to seven-month low Gold plunged to its lowest level since March yesterday - edging closer to US$1,800/oz, as treasury yields continued to move higher and the USD also strengthened.  The higher-for-longer narrative has been putting significant pressure on gold, which is leading to a significant reduction in investment appetite reflected by the large declines in gold ETF holdings in recent months. Fed policy will remain key to the outlook for gold prices in the months ahead.

The Commodities Feed: OPEC+ meeting delayed Oil prices came under pressure yesterday as this weekend’s scheduled OPEC+ meeting has been delayed. Disagreement between members leaves uncertainty over the group’s output policy for 2024.   Energy - OPEC+ meeting delayed Disagreement has returned to the OPEC+ alliance, which has seen the group’s scheduled meeting to discuss 2024 output policy delayed. Unsurprisingly, this news weighed heavily on the market - Brent was down as much as 4.9% at one stage yesterday. However, the market managed to claw back some of these losses to settle just 0.59% lower on the day. OPEC+ was scheduled to meet on 26 November. However, the meeting has been pushed back to 30 November. Several members are reportedly unhappy about their production targets for next year, levels which were announced back in June. This is specifically the case for Angola, Congo and Nigeria, who had their production targets cut since they struggled to hit their 2023 targets. These members were unhappy back then, and it was agreed that their targets would be revisited before the end of this year and possibly revised higher. Clearly, this has not happened. Angola’s output target was cut from 1.46MMbbls/d in 2023 to 1.28MMbbls/d in 2024, Congo’s target was reduced from 310Mbbls/d to 276Mbbls/d, whilst Nigeria’s target was cut from 1.74MMbbls/d to 1.38MMbbls/d. While Angola and Congo are currently producing below their 2024 production targets, Nigeria has managed to increase output recently and is pumping around 1.49MMbbls/d - above its target for next year. Disagreement between members will likely increase volatility within the market over the course of the next week. It is unclear how this will affect broader policy, or whether it could have any impact on Saudi Arabia extending its additional voluntary cut of 1MMbbls/d into early 2024. The EIA’s weekly inventory report was fairly bearish with US crude oil inventories growing by 8.7MMbbls over the week. This leaves total US commercial crude oil inventories at a little over 448MMbbls - the highest level since July. Despite refinery utilisation remaining below average levels for this time of year (following a fairly heavy maintenance season), gasoline stocks still increased by a marginal 750Mbbls. However, the distillate market continues to tighten. Distillate fuel oil inventories fell by a little over 1MMbbls, which leaves stocks at a little under 106MMbbls- the lowest since May 2022 and at the lowest level in at least 20 years for this time of year. We continue to believe that middle distillates will remain well supported.

The Commodities Feed: OPEC+ week Sentiment remains fairly negative in the oil market, given the ongoing dispute within OPEC+ over production quotas. However, there are reports of progress ahead of the group’s meeting on Thursday. Energy - OPEC+ makes progress Sentiment in the oil market remains negative. ICE Brent settled a little more than 1% lower on Friday, which means that Brent has seen 5 consecutive weeks of closing lower. The delayed OPEC+ meeting takes place this Thursday, and instead of being held in person in Vienna, the meeting will be remote. Reports suggest that the group is making progress in coming to a deal with Angola and Nigeria, who are not happy with their lower 2024 production targets. Whilst Angola is producing below its target for next year, Nigeria is currently producing above its 2024 target. Expectations are that Saudi Arabia will at least roll over its additional voluntary cut of 1MMbbls/d into next year. Clearly, if we do not see this, it would put further downward pressure on the market, given the surplus over 1Q24. We believe that the Saudis will roll over this cut and there is a growing possibility that we see a deeper cut from the broader group. In doing this, the group would provide good support to the market going into 2024.

Energy – OPEC crude oil production softens in November Sentiment in the oil market remains negative this morning, with both ICE and WTI futures trading almost 1% lower after the announcement from the OPEC+ meeting failed to convince the market about a tighter oil balance in the immediate term. Pessimism over compliance with the new deal remains one of the major concerns for the market for now. Initial data shows that OPEC crude oil production dropped to around 28.05MMbbls/d in November 2023 compared to 28.19MMbbls/d in October 2023, according to a Bloomberg survey. The BBG survey estimates that supply from Iraq and Nigeria dropped by 50Mbbls/d each, while Iran and Kuwait also lowered production by 40Mbbls/d each. Higher production from Saudi Arabia and Libya helped offset some of the production losses for the month. Weekly data from Baker Hughes shows that the US added five oil rigs over the last week, taking the total oil rig count to 505, whilst the gas rigs fell by 1, taking the total rig count (oil & and gas combined) to 625 for the week ended 1 December. US oil rigs have now increased to their highest level in nearly two months, although the recent weakness in oil prices could weigh on further rig additions over the coming weeks. The Al-Zour refinery in Kuwait is now fully operational as the third of the three mini refineries was brought online on Sunday. This will gradually increase the refining capacity of the facility to 615Mbbls/d from the current capacity of 410Mbbls/d. The plant halted its operational activities last month after a fuel gas feed was halted. Al-Zour is one of the largest oil-processing facilities in the Middle East and it is expected to boost the nation’s refining capacity to about 1.5MMbbl/d. The latest positioning data from CFTC shows that speculators decreased their net long position in NYMEX WTI by 6,408 lots for a ninth straight week over the last week, leaving them with net longs of 98,137 lots as of 28 November 2023, the lowest since the week ending on 4 July 2023. In contrast, money managers increased their net longs in ICE Brent by 11,630 lots over the last week after reporting five consecutive weeks of decline, leaving them with a net long position of 166,735 lots as of last Tuesday.