Oil Producers Maintain Output Curbing Till March 2018

Oil & Gas
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Friday, May 26, 2017 / 6:14 PM /FDC

The world’s oil producers agreed to maintain an output curbing deal till March 2018. This is good news for Nigeria – a major beneficiary of the oil cut exemption.

However, oil prices slipped to $52pb as the market expected deeper cuts. The potential impact of the improved oil earnings on the domestic economy will be felt in the near future.

The attached report summarizes the commodity price movements for this week.

Burning Economic Issues  

·         OPEC & non-OPEC agree on oil cut extension

·         Oil slides to $52pb

·         FG sets up minimum wage panel

·         Real GDP contracts 0.52% in Q1

·         Naira climbs to N380/$

·         I/E window flat at N382/$

·         Gala price crashes to N50

·         Diesel price flat at N165 per liter  

Economic News  

The Good  

·         OPEC extends output cut for 9 months

·         Naira appreciates marginally


The Bad


·         Recovery still tepid and prolonged

Power Generation analysis & Impact  

May 23rd : Average power output was 3656MWh/hour (up 390MWh/h)

·         Total power constraints : 2423MW for gas, line and water constraints

·         Estimated loss: N1.163bn (annualised at N424.5bn /$1.1bn)

·         Shiroro is back on after being shut down due to constraints

·         Gbarain NIPP down due to tripping of Alaoji/Owerri 132kV line

·         Egbin ST 6 is out for maintenance and Jebba is reporting water constraints   

Domestic Commodity Prices Movement   


 Stock Market 

·         NSE ASI 0.69% to 28,286.43pts
·         All sub sectors gained due to improved market sentiment

Oil prices

·         Brent crude 3.48% to $52.08pb

·         OPEC agree to extend oil cut policy till March 2018

·         Markets disappointed as Saudi Arabia ruled out deeper cuts

·         EIA reported a 4.4mb drawdown in US crude supplies

·         US production soared by 10% since mid 2016 to 9.3mbpd

Oil markets today 


Outlook – Oil Prices    

·         Outcome from OPEC meeting will determine prices

·         Gains may be undermined by rising US production

·         Break-even cost for some US producer range between $35 - $40pb

Outlook – Agric Prices 


·         Prices will be determined by supply/demand dynamics and weather developments



·         Forecast of improved weather in Brazil and weak global demand will weigh on prices


·         Prices expected to remain weak as oversupply from West African producers persist  

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