- Oil Trades Near $49 Before OPEC Talks on Output Cut Compliance
Oil traded near $49 a barrel before representatives of OPEC nations meet with their allies to discuss why some of them are falling behind in pledges to reduce production.
Futures fell 0.3 percent in New York after climbing 1.1 percent Friday. The two-day meeting in Abu Dhabi starting Monday and co-chaired by Kuwait and Russia will examine why some participants in the deal to collectively reduce global supply aren’t fully implementing their cuts. The number of U.S. drill rigs targeting crude fell by one last week, according to Baker Hughes Inc.
Oil in New York was unable to hold its first advance above $50 a barrel since May as signs of rising global supply eroded optimism that output curbs by the Organization of Petroleum Exporting Countries and its partners are rebalancing the market. Compliance to cuts fell to 86 percent in July, the lowest level since January, according to a Bloomberg survey.
“The big players are going to remain compliant, or at least say they are,” said Ric Spooner, an analyst at CMC Markets in Sydney. “Markets continue to assess the overall demand, supply and inventory situation as it unfolds. The likely range for oil at the moment is the mid-$40s to the low $50s.”
West Texas Intermediate for September delivery was at $49.41 a barrel on the New York Mercantile Exchange, down 17 cents, at 2 p.m. in Hong Kong. Total volume traded was about 10 percent below the 100-day average. Prices added 55 cents to $49.58 on Friday, trimming the weekly loss to 0.3 percent.
Brent for October settlement dropped 18 cents to $52.24 a barrel on the London-based ICE Futures Europe exchange. Prices rose 41 cents to $52.42 on Friday, reducing the weekly decline to 0.2 percent. The global benchmark crude traded at a premium of $2.68 to October WTI.
Saudi Arabia said last month that it planned to increase pressure on nations that didn’t comply with their pledged cuts. Compliance by members from OPEC slid to 78 percent in June, compared with 82 percent from its 10 non-OPEC partners, according to the International Energy Agency.
Naira Exchange Rates Today, Thursday, July 29, 2021
Naira continues its decline across the board as forex scarcity persists following the Central Bank of Nigeria’s decision to cut off the bureau de change forex section.
The Naira exchanged against the United States Dollar at N520 on Thursday at the black market. Against the British Pound and the Euro, the local currency exchanged at N715 and N600, respectively.
The Central Bank of Nigeria had accused Bureau de Change operators of engaging in money laundering and illicit flows with criminal-minded individuals that operate mainly at the unregulated black market section of forex.
Operators at the bureau de change section of forex had been accused of being the main source of forex for speculators and hoarders that manipulate forex rates at the unregulated black market, this the CBN plans to curb by cutting its weekly forex supply to BDCs but focus on servicing the economy through the banks.
Naira Black Market Exchange Rates
Morning * Midday** Evening *** Final Rates
Bureau De Change Naira Rates
Central Bank of Nigeria’s Official Naira Rates
|7/28/2021||SOUTH AFRICAN RAND||27.6161||27.6498||27.6836|
N.B: These tables are updated three times a day.
CBN Orders Deposit Money Banks To Sell FX To Customers
The Central Bank of Nigeria, CBN, has ordered Deposit Money Banks, DMBs to sell foreign exchange (FX) to customers.
CBN disclosed this in a letter to all banks reminding them to set up teller points at designated branches across the country to fulfill legitimate FX requests by customers.
The regulator, on Tuesday, has announced the discontinuity of forex supplies to the Bureau de Change Operators, BDCs in the country over their continuous abuse of the privilege.
The letter, signed by Haruna Mustafa Director, Banking Supervision Department, stated: “Further to the Monetary Policy Committee (MPC. briefing of July 27, 2021, al Deposit Money Banks (DMBs are hereby reminded to set up teller pots at designated branches across the country to fulfil legitimate FX requests for Personal Travel Allowance (PTA Business Travel Allowance (BTA, tuition fees, medical payments SMEs transactions amongst others.
“In this regard, DMBs are also required to adequately publicize the locations of the designated branches and make necessary arrangements to sell FX to customers in cash and/or electronically in compliance with extant regulations.
“DMBs are strongly advised to ensure that no customer is turned back or refused FX provided that documentation and all other requirements are satisfied. Equally undue delays, rationing and/or diversion of FX is strongly discouraged whilst DMBs are required to establish electronic application and alert systems to update customers on the status of their FX requests.
“As communicated during the briefing, a toll-free line has been set up at the CBN for bank customers to escalate unresolved complaints related to their FX requests.
“The CBN will continue to closely monitor banks’ conduct and compliance with this directive in order to ensure an efficient FX market for all legitimate users.
“Please note that any breach of the directive will be severely sanctioned.”
Economists Urged CBN To Reappraise Forex Policy And Eliminate Arbitrage
The decision of the Central Bank of Nigeria (CBN) to suspend dollar sales to the Bureau de change operators has “disrupted one of the juiciest gravy trains in the Nigerian economic racket,” according to the a renowed economist, Bismack Rewane and his team.
In its economic note, Rewane and his team at the Financial Deravatives Company believed that though BDCs are licensed by the CBN, the point had been reached where the program was no longer tenable and surely not sustainable.
“A country whose total exports and receipts were approximately $59.8bn, was spending $5bn to subsidize supposed Nigerian tourists during a covid year.
“In other words, spending more on tourism rather than debt servicing. Therefore, the structure of the forex market needed sanitization,” the team of economists led by Rewane at the FDC said in the note.
The team, however, disagreed with the CBN on its decision to divert dollar meant for the BDCs to banks, saying such an amount to “handing over the yam barns to goats to secure.”
They said such interim solution of substituting BDCs with banks is hardly going to achieve much.
“The question that arises is what is the optimal solution? Administrative controls or market pricing? The interim solution of substituting BDCs with banks is hardly going to achieve much.
“You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats.
“One of the options is to simultaneously allow banks to retail dollars as they have done in the past and make BDCs engage in retailing same but at a buy rate different from today’s subsidized rate, i.e buy dollars from the CBN at the parallel market rate less a N10 premium.
“For example, if the parallel market rate is N500/$, the purchase rate from the CBN will be N490/$. If the BDCs sell at N550/$, the CBN increases its rate for BDCs to N540/$.
“That will be the same retail rate at the banks. This eliminates the arbitrage corridor and abuse. It will certainly reduce the demand for dollars and it must coincide with an increase in dollar supply from the CBN.
“This way, the naira will appreciate towards the ever-elusive fair value or the REER (Real Effective Exchange Rate), which today is anywhere between N470 and N490/$,” FDC team stated.
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