Connect with us

Markets

Ghana Is Said to Weigh Scaling Down $2.3 Billion Bond Plans

Published

on

bonds
  • Ghana Is Said to Weigh Scaling Down $2.3 Billion Bond Plans

Ghana is considering scaling down plans for a 10 billion cedis ($2.3 billion) local-currency bond sale as the West African nation struggles to identify revenue sources for interest and capital repayments, according to two people familiar with the matter.

The debt, which will be issued through a special-purpose vehicle and backed by a tax on the sale of petroleum products, may be staggered in smaller tranches as the projected income from the levies are only sufficient for a bond sale of 7 billion cedis over 15 years, said the people, who asked not to be identified because they’re not allowed to speak publicly about the issue. The matter was discussed at an Aug. 16 meeting where the Finance Ministry and deal advisers Standard Chartered Bank Ghana Ltd. and Fidelity Bank Ltd. gauged investors’ appetite for the debt.

The ministry will consider more revenue sources before making a final decision on the size of the bond, the people said.

Finance Minister Ken Ofori-Atta and a spokeswoman for Standard Chartered didn’t answer calls seeking comment. Fidelity Bank Managing Director Jim Baiden declined to comment when contacted by phone.

The cedi weakened 0.6 percent to 4.4538 against the dollar at 3:56 p.m. in the capital, Accra, the lowest since March 22. The yield on Ghana’s 2026 dollar bonds fell 7 basis points to 7.3 percent.

Ghana is selling the debt to clear arrears owed to banks by state-owned electricity and petroleum utilities. The seven-month old government of President Nana Akufo-Addo has vowed to boost banks’ ability to lend and accelerate growth after gross domestic product in West Africa’s second-biggest economy expanded at the slowest pace in 26 years in 2016.

Sovereign Guarantee

The stock of non-performing loans at banks was 8 billion cedis on June 30, according to Bank of Ghana data. The three major power utilities, Electricity Company of Ghana, Volta River Authority and Ghana Grid Company, had 7.7 billion cedis in payable loans at the end of 2015, according to the International Monetary Fund.

Some attendees at the Aug. 16 meeting were concerned that the bond won’t carry a sovereign guarantee and are seeking more assurances that the current and future governments will continue to allocate energy sector levies to the special purpose vehicle, said the people.

The ministry and advisers are said to be considering a maturity date of seven to 15 years. Bids are likely to open next month, with the arrangers seeking to place as much as 60 percent of the bond with foreign investors, said the people.

“The main stress in the economy right now is the banking industry, due to its non-performing loans,” Karl Ocran, head of investments at Frontline Capital Advisors Ltd. in Accra, said by phone. “The success or not of the energy bond in September is going to be a catalyst for the next waive of sentiment.”

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Published

on

Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

Continue Reading

Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Published

on

Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

Continue Reading

Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Published

on

oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

Continue Reading

Trending