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Markets Today – Ukraine, PMIs, Oil, Gold, Bitcoin

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

The rollercoaster ride that is 2022 is continuing at the start of the week as European equities relinquish early gains to make heavy losses.

The week got off to a decent start, following reports of France brokering a meeting between Joe Biden and Vladimir Putin. While the West has continued to warn of an imminent invasion, with Russia apparently following the playbook for such a move, a meeting between the two leaders increases the potential for a diplomatic resolution.

But as we’ve seen so often over the last couple of weeks, the headlines are coming thick and fast and markets are responding accordingly. We’ve gone from optimism around a Biden-Putin meeting, on the back of Blinkin and Lavrov on Thursday, to the Kremlin denying concrete plans have been made and more reports of fighting in Eastern Ukraine.

It feels like the situation can dramatically escalate at any moment and that’s going to keep investors on edge for now. The fact that diplomacy is still being pursued is encouraging but the risk of this boiling over has not been higher. We may well be on the brink of something terrible happening and that’s continuing to feed into the negativity in the markets.

PMIs across Europe a cause for optimism

The PMI data from across Europe this morning has been a source of positivity at the start of the week, with countries appearing to bounce back quickly and strongly from the recent omicron wave. Signs of supply issues easing are also a big positive as that should contribute to price pressures abating over the coming months.

Ultimately, it’s encouraging that economies remain in such a strong position despite coming under enormous strain again in recent months. Restrictions and worker shortages have taken their toll once more but firms are bouncing back and extremely confident about the period ahead. Of course, it brings its own challenges but the prospect of uninterrupted, restriction-free trade will be music to the ears of many.

Oil marches higher as optimism fades around Ukraine

It’s been another volatile session in the oil market, with doubts over US-Russian diplomatic efforts lifting prices. Oil prices were declining early in the day at the prospect of a Biden-Putin meeting but as hopes around that have unravelled, the price of oil has climbed.

This is despite a nuclear deal between the US and Iran seemingly being close which could bring 1.3 million barrels per day back into the markets, alleviating some of those pressures we’re currently seeing. OPEC+ is continuing to struggle to hit its quotas which has largely created the imbalance we’re seeing, with the group’s compliance hitting 129% last month, up from 122% in November.

Gold choppy around psychological resistance barrier

It’s been a choppy start to the week in the gold market, with the yellow metal initially seeing some profit-taking but it quickly found itself back in demand as the headlines turned ugly once more. Gold continues to see resistance around $1,900 though, which is proving to be a major psychological barrier.

While there is still hope for diplomacy, which would reduce gold’s safe-haven appeal, there’s certainly reason to believe an invasion could happen at any moment. That will continue to see gold well supported and, in the absence of serious progress on Thursday when Blinkin meets Lavrov, a break may not be far away.

Bitcoin response key after the first setback in a month

Bitcoin has suffered in recent days as the mood in the markets has turned sourer. It’s recovered quite well over the course of the day, having been down a lot more at one stage. But the break of $41,500 on Thursday and then $40,000 over the weekend is a blow that will test its resilience. It’s performed very well recently under the circumstances and this is the first real setback in a month. How it responds will be key.

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Crude Oil

Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Crude oil

Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil

Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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Energy

NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade

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Mele Kyari - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.

Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.

Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.

In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.

Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.

He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.

Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.

In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.

Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.

The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.

As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.

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