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ECB Keeps Policy Settings Unchanged Awaiting Political Clarity

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  • ECB Keeps Policy Settings Unchanged Awaiting Political Clarity

The European Central Bank kept interest rates unchanged at record lows and maintained its quantitative-easing program as officials monitor the economic recovery and the risk of political turbulence in the region.

The Governing Council reaffirmed its decision that asset purchases will continue at a monthly pace of 60 billion euros ($65 billion), down from 80 billion euros prior to April. Policy makers left the main refinancing rate at zero and the deposit rate and marginal lending rate at minus 0.4 percent and 0.25 percent respectively, as predicted by all economists in a Bloomberg survey.

The ECB also said rates will stay at present or lower levels for an extended period, and well past the horizon of net asset purchases, which remain flexible in size and duration if the outlook becomes less favorable. President Mario Draghi will explain the decision in a press conference at 2:30 p.m. in Frankfurt.

The euro fell to a session low of $1.0882 after the decision and traded at $1.0888 at 1:47 p.m. Frankfurt time.

Political risks have dominated much of the year so far, leaving the ECB cautious even as data point to a strengthening recovery. With one of those risks — a euro-skeptic victory in the French presidential election — looking less likely after Sunday’s first round vote, officials may now have more confidence in the economy. Some policy makers have already pushed for discussions around an eventual exit strategy, a debate Draghi has tried to stymie for now.

Before the decision, a further signal of euro-area strength came from a European Commission report showing economic confidence jumped this month to the highest level in almost a decade.

Draghi may still choose to use his opening statement at the press conference to say that risks to the growth outlook are balanced, rather than being to the downside. Even so, he’s likely to repeat his view that monetary support is still needed, with underlying consumer-price growth weak and the level of uncertainty high.

Stimulus Timeline

Thursday’s Governing Council decision is in line with a plan set out in December, when the ECB announced that bond purchases will be extended until at least the end of 2017. That will take the total amount of assets bought under the program to 2.28 trillion euros, equivalent to about a quarter the size of the entire euro-area economy.

Economists predict the first hints of an exit from this extraordinary stimulus to come by June 8, when the Governing Council next announces policy and publishes projections on the economic outlook. The ECB could change its forward guidance as a first step toward phasing out QE at the beginning of 2018 and conducting the first rate hike in the third quarter of that year, according to the survey.

By the June meeting, France will have elected its new president, offering the ECB more certainty on the political front, though risks remain in nations such as Italy and Greece. Germany will hold elections in September.

On the economic side, officials will have had two quarters of inflation rates averaging above 1.6 percent — according to forecasts — and at least a small uptick in underlying price growth that could justify a more optimistic tone. Price data for April is scheduled to be released on Friday at 11 a.m. Frankfurt time.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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