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Markets Today – EU Bonds, Nickel, US Russia Ban, IEA, Oil, Gold, Bitcoin

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

European stock markets have been given an unexpected boost on Tuesday following reports that the bloc is close to an agreement on fresh joint bond sales to fund major projects.

It was reported that the joint bond sale will fund energy and defence spending across the EU following the Russian invasion of Ukraine. Europe has long been criticised for its over-reliance on Russian oil and gas, as well as its failure to hit its 2% NATO defence spending target, and the invasion has created the urgency to make the long-overdue changes.

While the short-term solutions will probably be focused on diversifying its supply, there will likely be a significant acceleration in its push towards green energy in the longer term. The size and make-up of the package could be announced in the coming days which will highlight just how seriously the EU is about transitioning away from Russia in light of recent events.

Unfortunately, these reports will only likely bring temporary reprieve in equity markets, a day after they were tipped into bear market territory. There still remains considerable uncertainty around the Russian invasion of Ukraine and commodity markets are continuing to see some extraordinary moves as a result.

The ripple effects from the invasion are severe and widespread and the worst may still be to come as traders desperately try to assess the fallout from potential supply disruptions of a wide range of commodities. The LME was forced to suspend nickel trading earlier after the price more than doubled to above $100,000 per metric ton in the mother of all short squeezes. Further market turbulence in the commodity space could easily follow.

Oil higher as the US prepares Russian import ban

There’s a lot going on in the oil market at the minute which is contributing to the huge amount of volatility and uncertainty we’re seeing. It’s such a headline-driven market at the moment and today is certainly no different. US President Joe Biden is reportedly preparing to announce a unilateral ban on imports of Russian oil, LNG, and coal as part of the latest actions to hold the country accountable for its invasion of Ukraine.

The “unilateral” aspect of that is the most important as far as markets are concerned which is why oil prices are only 5-6% higher today, rather than 15-20%. Still, it’s a bold move from the US, even if Russian imports make up a relatively small number. It’s another step towards the West turning its back on Russia and leaving it isolated in the world. Europe’s move will be slower but the debt raising is a big first step towards something similar.

At the same time, the IEA has warned the 60 million barrel coordinated reserve release last week was just an initial response and represented just 4% of IEA member stores. The group is expected to go further in order to bring down the price and we can only hope that future efforts will be more successful.

Of course, against the backdrop of war in Ukraine and severe sanctions against Russia, that’s easier said than done. There was a not-so-subtle dig at Saudi Arabia and UAE in there as well, both of whom have refused to use spare capacity to ease supply issues and instead stuck with their fellow OPEC+ partners.

Rarely been a stronger bull case for gold as it approaches all-time highs

We may be seeing a temporary rebound in risk appetite today but that’s not weighing on demand for gold, as commodity prices continue to spur fears of soaring inflation and recessions. The yellow metal has stormed above $2,000 to trade up around 2% on the day and it’s not looking like slowing down.

Record highs are not that far away and it’s hard to imagine a scenario in which demand doesn’t remain strong. We’re seeing such significant amounts of volatility and uncertainty at the moment that there’s rarely been a stronger bull case for a traditional safe haven like gold.

Bitcoin facing major risk headwinds again

Bitcoin is recovering alongside risk appetite, up around 3% on the day. The realignment with broader risk appetite has been an interesting development having gone through a period of gains on the back of increased adoption following the invasion and Russian sanctions.

There’s still scope for further support if we see more evidence of increased adoption but the realignment with risk could now be a headwind for the price. It’s hard to imagine a significant rebound against the backdrop of the terrible scenes in Ukraine and increasing sanctions.

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Energy

Nigeria Partners with ECOWAS and Morocco to Launch $26B African Gas Pipeline

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Gas-Pipeline

The Nigerian government, in partnership with the Economic Community of West African States (ECOWAS), Morocco, and Mauritania, has announced plans to advance the $26 billion African Atlantic Gas Pipeline project to drive economic growth across Africa.

This development was revealed on Monday, November 5, by Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), at the ECOWAS Inter-Ministerial Meeting on the Nigeria-Morocco Gas Pipeline Project.

Speaking at the meeting, which was attended by ECOWAS Ministers of Hydrocarbons and Energy as well as representatives from Morocco and Mauritania, Kyari stated that, once completed, the project will connect 13 African countries.

Represented by Olalekan Ogunleye, NNPC’s Executive Vice President for Gas Power & New Energy, Kyari said this will be Africa’s largest pipeline project.

Ogunleye confirmed that progress has been made with the front-end engineering design completed, the phase two study finalized, and work ongoing for environmental and social impact assessments as well as land acquisition and resettlement.

He emphasized NNPC’s readiness to execute the project: “Today, we come together to make significant progress in the African Atlantic gas pipeline project, which is a transformative initiative connecting at least 13 African nations in shared prosperity and development. These achievements underscore our capability to deliver this landmark project, supported by strong regional collaboration.”

Ekperikpe Ekpo, Minister of State for Petroleum Resources (Gas), described the project as a game-changer for the regional economy, stating, “We stand at a critical juncture where these agreements can reshape our energy landscape, strengthen our economies, and uplift our people.”

He also highlighted that the project will increase Africa’s presence in the global gas market, noting that “the agreements demonstrate a strong commitment to advancing hydrocarbon and energy trade across ECOWAS, enhancing access to natural gas in West Africa, and expanding Africa’s global footprint in the gas market.”

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Crude Oil

Nigerian Army Seizes 700,000 Liters of Stolen Petroleum in Sweeping Raid Across Four States

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In a series of raids across Rivers, Bayelsa, Akwa Ibom, and Delta states, troops from the 6th Division of the Nigerian Army seized 700,000 liters of stolen petroleum products, sealed 29 illegal refining sites, and arrested 24 suspected oil thieves.

In a statement issued by the Division’s Public Relations Officer, Lt. Col. Danjuma Jonah, it was noted that 14 boats involved in crude oil theft were also destroyed during the operation.

Jonah disclosed that the raids were conducted between October 28 and November 3, 2024.

He revealed that the troops intercepted a large wooden boat carrying over 150,000 liters of stolen crude oil in the Kula area of Akuku-Toru Local Government Area of Rivers State.

Providing a breakdown of the operation, Jonah stated, “Another boat carrying 50,000 liters of crude oil was seized, while three illegal refining sites were dismantled, and cooking pots containing 20,000 liters of stolen diesel were confiscated. Troops also dismantled ten illegal refining sites in Kay and Abesa in Akuku-Toru LGA, seizing 400,000 liters of illegally refined diesel.”

In Bayelsa State, soldiers deactivated two illegal refining sites at Boma Creek in Southern Ijaw LGA, recovering storage tanks holding over 2,500 liters of stolen crude. Similarly, operations in Obughene Creek in Southern Ijaw yielded over 4,500 liters of stolen crude, while another 3,000 liters of illicit product were seized at West Boma Creek.

In Akwa Ibom State, troops intercepted two Toyota Camrys loaded with illegally refined diesel, concealed in nylon bags, totaling 3,000 liters. The vehicles were stopped along the Ikot Abasi-Abak road, and the drivers were detained.

In Delta State, multiple raids were conducted, including the interception of a tricycle in Kwale, Ndokwa West LGA, carrying stolen iron pipes allegedly taken from decommissioned Oando pipelines.

Another raid in Patani town uncovered a storage dump containing 40 jerricans of stolen products, while troops patrolling Uro Community waterways intercepted a wooden boat with 200 sacks of premium motor spirit,” he concluded.

The statement added that suspects arrested during the raids have been handed over to relevant authorities for prosecution.

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Crude Oil

OPEC+ Supply, Trump-Harris Election Face Off Lend Support to Oil Prices

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Crude oil

The decision of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ to delay plans to increase output for another month and the close call of the presidential elections in the United States triggered a 2 percent rise in oil prices.

Brent futures were up $1.98, or 2.7 percent at $75.08 a barrel while the US West Texas Intermediate (WTI) crude rose $1.98, or 2.85 percent to $71.47.

OPEC+ said it would extend its output cut of 2.2 million barrels per day for another month in December at a meeting on Sunday.

Saudi Arabia and Russia, as well as Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates (UAE) agreed to extend the November 2023 voluntary production adjustments of 2.2 million barrels per day for one month until the end of December 2024.

The move is aimed at boosting oil prices amid uncertain demand and accelerating supply, with an eye on the imminent US presidential election, though analysts predict a limited impact.

Also speaking on Monday, OPEC’s Secretary General, Mr Haitham Al Ghais said on Monday that OPEC remains very positive on demand for oil in both the short and long term.

The market has also shifted focus to the American presidential election between Democratic presidential nominee and current Vice President, Kamala Harris and Republican Donald Trump on Tuesday (November 5).

So far, the outcome has shown that the election is tight as it could take days after voting ends to know the eventual winner.

The market will also be looking at the developments in the Middle East, especially with anticipation that Iran was preparing to attack Israel from Iraq within days.

Markets were also watching a new tropical storm that was forecast to form on Monday in the Caribbean and threaten offshore oil production along the Gulf of Mexico.

Oil companies like Shell have moved its non-essential personnel from six platforms, adding it currently expects no other impacts on its production across the Gulf of Mexico.

There will be anticipation of what the US Federal Reserve will do at the next meeting on Thursday with expectations high that the US central bank will cut interest rates by 25 basis points.

Also, investors will be looking to China where the government is expected to approve additional stimulus to boost the slowing economy in the world’s largest oil importer.

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