- NSE Index Rises 0.98% as Investors Swoop on Oil Stocks
A significant rally in oil and gas stocks assisted to extend gains at the stock market to the fourth session as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) rose 0.98 per cent to close at 26,071.16.
The market had last week sustained a positive momentum to close higher for the second consecutive week, rising by 0.30 per cent. That uptrend followed investors’ swoop on undervalued and fairly priced stocks after the selloffs experienced in November.
When the market resumed yesterday, the bulls maintained their control of the market driven by a significant rally in oil and gas stocks as investors reacted to a jump in crude oil prices to an 18-month high – supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organised by OPEC and other exporters. Yesterday’s performance pushed the month-to-date growth in NSE ASI to 3.05 per cent.
Seplat Petroleum Development Company Plc and Forte Oil Plc led the price gainers with 10.2 apiece to close at N374.85 and N117.11 respectively. Champion Breweries Plc followed with 9.6 per cent, while Dangote Flour Mills Plc went up by 7.6 per cent.
Oando Plc and Total Nigeria Plc appreciated 6.7 per cent and 5.0 per cent in that order.
Neimeth International Pharmeuticals Plc, Honeywell Flour Mills Plc and Transcorp Plc chalked up by 5.0 per cent, 4.7per cent, 4.7 per cent respectively. In all, 23 stocks appreciated while 14 stocks depreciated.
Conversely, Avoncrowncaps Plc led the price losers with 5.0 per cent, trailed by Portland Paints and Products Nigeria Plc with 4.8 per cent. Union Bank of Nigeria Plc, AXA Mansard Insurance Plc, Fidson Healthcare Plc and Fidelity Bank Plc shed 4.7 per cent, 4.6 per cent and 3.4 per cent in that order.
In terms of sectoral performance, the NSE Oil & Gas Index led with 6.3 per cent on the back of increased buying interest in Seplat and Forte Oil while the NSE Industrial Goods Index gained 0.9 per cent. The NSE Banking Index rose by 0.7 per cent as gains in Guaranty Trust Bank (+2.0 per cent) and Access Bank (+2.0 per cent) buoyed the sector. Contrarily, the NSE Insurance Index declined 0.7 per cent as losses in AXA Mansard (-4.7 per cent) and WAPIC Insurance Plc (-2.0 per cent) impacted sector performance. The NSE Consumer Goods Index shed 0.02 per cent.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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