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Reserve Bank of Australia Says Recent Data Positive

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Australia’s central bank said low interest rates are supporting household spending and a weaker exchange rate is aiding local firms, even as it reiterated that a subdued inflation outlook gives scope to ease policy further if needed.

“Recent domestic data had generally been positive,” the Reserve Bank of Australia said Tuesday in minutes of its Dec. 1 meeting, where it kept rates at a record-low 2 percent for a seventh month. “Even so, members recognized that there was still evidence of spare capacity in the economy.”

Australia recorded its biggest back-to-back monthly jobs gain since 1988 after adding 71,400 workers in November, and consumer confidence has held up as optimists continue to outweigh pessimists. Expectations the central bank will further lower its benchmark in coming months to boost below-average growth have moderated, with traders pricing in a 44 percent chance of a rate cut by June.

The local currency edged higher, trading at 72.58 U.S. cents at 11:35 a.m. in Sydney from 72.42 cents before the release.

Australia is grappling with the fallout from plunging prices of its commodity exports including iron ore as key trading partner China’s economy cools.

“There was overcapacity in some parts of the Chinese economy,” the RBA said. “Conditions were likely to become more difficult over time for a range of unprofitable firms.”
The central bank, which cut rates twice this year, could be gaining traction in its efforts to boost confidence to spur spending and encourage business investment.

Rate Boost

The RBA noted stronger employment growth and surveys showing above average conditions for firms. “There continued to be evidence that very low interest rates were supporting growth in household consumption and dwelling investment, and the exchange rate was adjusting to the significant declines in key commodity prices and boosting demand for domestic production,” it said.

Australian firms in industries including tourism, education and manufacturing have been assisted by a 30 percent drop in the Australian currency since the beginning of 2013.

The RBA said “subdued” wage inflation last quarter was consistent with its forecast for a “prolonged period” of weak growth in pay packets. It said consumer prices were likely to remain consistent with its target range.

“Members judged that the outlook for inflation may afford some scope for a further easing of monetary policy should that be appropriate to lend support to demand,” the minutes said, reiterating recent previous comments.

The central bank will also be waiting on the Federal Reserve meeting this week, when U.S. policy makers are expected to tighten for the first time in almost a decade, potentially exerting downward pressure on the Aussie dollar as a rate differential narrows.

Still, the RBA noted that as confidence in a U.S. move built, the Aussie dollar had appreciated over the prior month, in contrast with most other currencies.

 

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Crude Oil Dips Slightly on Friday Amid Demand Concerns

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On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.

Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.

Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.

The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.

This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.

Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.

Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.

While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.

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Nigeria’s Petrol Imports Decrease by 1 Billion Litres Following Subsidy Removal

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Nigeria’s monthly petrol imports declined by approximately 1 billion litres following the fuel subsidy removal by President Bola Ahmed Tinubu, the National Bureau of Statistics (NBS) reported.

The NBS findings illuminate the tangible effects of this policy shift on the country’s petroleum importation dynamics.

Prior to the subsidy removal, the NBS report delineated a consistent pattern of petrol imports with quantities ranging between 1.91 billion and 2.29 billion litres from March to May 2023.

However, in the aftermath of Tinubu’s decision, the nation witnessed a notable downturn in petrol imports, with figures plummeting to 1.64 billion litres in June, the first post-subsidy month.

This downward trend persisted in subsequent months, with July recording a further reduction to 1.45 billion litres and August witnessing a significant decline to 1.09 billion litres.

August’s import figures represented a decrease of over 1 billion litres compared to the corresponding period in 2022.

The NBS report underscores the pivotal role of the subsidy removal in reshaping Nigeria’s petrol import landscape with the Nigerian National Petroleum Company emerging as the sole importer of fuel in the current scenario.

Despite higher petrol imports in the first half of 2023 compared to the previous year, the decline in June, July, and August underscores the profound impact of subsidy removal on import dynamics, affirming the NBS’s latest findings.

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Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO

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The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.

Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.

Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.

He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.

Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.

The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.

Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.

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