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Harvest Season Has Begun; Expected to Increase Supply and Moderate Prices

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Tuesday, October 17, 2017 / 6:09 PM /FDC

As widely anticipated, headline inflation declined marginally to 15.98% in September from 16.01% in August. Food and core inflation moved in opposite directions in the month of September. 

Fundamentally, inflation in Nigeria is moderating, but could swing upwards if there is a surge in money supply and wages increase sharply. So far in 2017, M2 has contracted by 11.06% but the velocity of circulation has increased. 

The harvest season has also begun and is expected to increase supply and moderate prices. However, cost-push factors such as diesel (N200 per litre) continue to increase costs.
 


Burning Economic Issues
  

·        September inflation down marginally to 15.98%

·       
Brent crude up 0.42% to $58.06pb, 4.3% higher than September’s average

·       
External reserves up to $33.1bn- Highest in 33months

·       
Naira depreciates slightly in parallel market to N364/$

·       
Diesel retail price flat at N200/ltr

Economic News

The Good

·       
Oil prices trading close to $60pb


The Bad
·        High diesel price to kick producer price index upwards

·       
Price of palm oil up 16.6% to N14000 (25ltr)

·       
On-grid power down after 3-day recovery to 3655MW

Power Generation analysis & Impact  
October 11th: Average power output sent was 3655MWh/hour (down 124MWh/h)


·       
Gas constraint was 401MW; frequency management constraint due to loss of DisCo feeders was 1994MW

·       
Estimated loss: N1.149bn (annualised at N419.39bn /$1.05bn)

·       
DisCos’ inability to pick load is the largest constraint to improved service delivery 

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Domestic Commodity Prices Movement
   

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 Stock Market 

·        NSE ASI 0.33% to 36,971.27pts

·       
Consumer goods sub index 0.31% to 932.43pts 

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Oil Prices

·        Brent crude 0.42% to $58.06pb

·       
Deterioration in Iraq and Kurdistan’s conflict

·       
Expectations of renewed US sanctions against Iran

·       
Strong Chinese demand up to 9mbpd- Highest import volume since May

·       
US rig count declined by 5 to 743 – Baker Hughes (Oct 13th)

Oil Markets Today
 

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Outlook – Oil Prices    

·        Markets expected to rally post Baker Hughes report

·       
Coupled with expectations of geo-political tension

Outlook – Agric Prices
 

Grains 
  
·        Expectations of the end of harvest season to drive price movements

Soft

Sugar
·        Commencement of crushing season (25mt) to weigh on prices 

Cocoa 

·        Prices to trade bearish despite strong chocolate market in the US

Related News

1.       Price of Cement is up 8% to N2,700 while Brent Slipped to $56.34pb

2.      Domestic Price of Palm Oil Has Declined by 25% in 12 Months

3.      FG to Bring Down the Price of a 50kg Bag of Rice to N9,000 Within a Month

4.      Price of Cement Dropped by 3.8% to N2,500 per Bag

5.      Oil Prices Climbed Sharply to a 2-year High of $59pb

6.      Cashew Nut Exports Increased Significantly by 463% to $37m in Q2’17

7.      Volatile Oil Prices in August

8.     Oil Prices Hovered Around $55pb Ahead of OPEC Meeting

9.      Higher Price of Oil Has More Than Compensated for Any Cocoa Shortfalls

10.  Oil Price Up to $54.16pb Due to Lower OPEC Production

11.   BUA Group Additional Investment Likely to Drive Cement Price Downwards

12.  Commodities Market Exports – Brent Crude Traded Bullish in the 2nd Half of August

13.  Intermittent Power Supply In Nigeria Has Become An Intractable Problem

14.  Nigeria’s Dependence on Imported Sugar will Reduce as Dangote’s $450mn Initiative Takes off

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