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South Africa Will Recover from Economic Recession Soon Says President Ramaphosa

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Cyril Ramaphosa
  • South Africa Will Recover from Economic Recession Soon Says President Ramaphosa

South Africa will soon recover from recession, President Cyril Ramaphosa said on Thursday in his first reaction to news that undermines his effort to revive the economy and attract investment after a decade of stagnation.

Ramaphosa staked his reputation on economic revival when he took over in February from Jacob Zuma, whose tenure was plagued by scandal, and investors welcomed his accession to power in part due to his strong ties to the business community.

Ratings agency Moody’s said the slide into recession in the second quarter would exacerbate fiscal and monetary challenges. It said weaker-than-expected economic data was “credit negative”.

Data on Thursday showed the current account deficit narrowed to 3.3 percent of gross domestic product in the second quarter, from a revised 4.6 percent in the first quarter. The rand extended its gains to more than 1 percent stronger on the news.

The deficit figure was slightly smaller than the 3.4 percent deficit analysts polled by Reuters had expected, a much-needed boost for after data this week showed the economy slipped into recession for the first time since 2009.

In his first comments on the recession, Ramaphosa said the setbacks were temporary.

“All these things that are happening now are transitional issues that are going to pass,” Ramaphosa was quoted by local news agency Eyewitness News as saying.

“I will be meeting with the business community soon, so that we rally everyone together and pull our country out of the situation that we are in,” added Ramaphosa, who was attending a China-Africa summit in Beijing when the data was released.

South Africa needs faster economic growth to reduce its 27 percent unemployment rate and alleviate poverty and inequality, both of which stoke instability.

The ruling African National Congress (ANC) has made repeated pledges to improve the economy. Unemployment is a key concern for voters ahead of elections next year.

MOODY’S WARNING

The rand has slumped as much as 5 percent against the dollar this week and government bonds have sold off steeply, also hurt by the turmoil on Turkish and Argentinian financial markets.

“This weaker-than-expected economic performance will exacerbate fiscal and monetary challenges, a credit negative,” Moody’s said in a statement on the weaker GDP figures.

The agency is the last of the “big three” international agencies to rate South Africa’s long-term foreign-currency debt investment grade.

While releasing the current account data, the Reserve Bank, which meets on Sept. 20 to decide on interest rates, said the improved current and trade account figures were due to higher value and volume of merchandised exports.

“South Africa’s terms of trade (including gold) improved in the second quarter of 2018 as the rand price of exports, including gold, increased at a faster pace than that of imports,” the central bank said in a statement.

Several foreign banks have slashed their growth forecasts for South Africa to less than 1 percent this year.

“Moody’s has pointed out that the task of fiscal consolidation is going to get harder, but I don’t think they’ll change our credit rating yet,” said portfolio manager Wayne McCurrie at First National Bank.

“A narrow current account helps. Any good news in this environment is really good news.”

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

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand

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Crude oil

Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Crude Oil - Investors King

Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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