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Markets Today – Ukraine, Eurozone Inflation, NFP, Oil, Gold, Bitcoin

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Cautiously Higher After Strong Jobs Report

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

Equity markets are nudging higher at the end of the week after suffering losses a day earlier, as the consolidation phase continues.

This continues to be a very headline-driven market and they’re coming thick and fast. Talks between Ukraine and Russia are progressing well, it seems, but things can change rapidly, for better or worse. Until we see a deal, the situation will continue to feel precariously balanced and investors will remain on edge as a result.

Claims of a Ukrainian attack on a fuel depot in Belgorod, where further explosions have recently been reported, may ignite further tensions if proven to be accurate. Not that Russia itself has lowered the intensity of its attacks in Ukraine since the negotiations began, of course. Naturally, the Kremlin won’t let hypocrisy stand in the way if it wants to escalate the crisis once more. Interestingly, Ukraine is yet to confirm responsibility for the attacks.

Eurozone inflation piles further pressure on ECB

Inflation in the eurozone hit another all-time high in March, jumping to 7.5% from 5.9% in February. Energy prices are strongly behind the move which isn’t going to change any time soon, although price pressures are becoming a little more widespread. The core reading only rose to 3% though, up from 2.7%, which is still way above the ECB’s 2% inflation target.

The central bank has continued to swim against the tide when it comes to inflation and despite a major shift at the last meeting, continues to be far less hawkish than the markets. Today’s data will make life even harder for the ECB which may start to move more in line with market pricing of 40-50 basis points of hikes by year-end if this continues.

Another strong jobs report

The US jobs report was once again quite strong, even if the headline NFP fell a little short of expectations. The creation of 431,000 jobs is still extremely good at a time when unemployment is falling to 3.6%, which surpassed expectations. Throw into the mix higher participation which the Fed will no doubt be pleased to see as this is one thing that can alleviate some of those wage pressures and it’s hard to find fault with the report. As it is, wages are still rising strongly at 5.6%, somewhat offsetting the inflation drag. Ultimately, this means plenty of rate hikes this year and probably more chance of one or two super-sized, the first of which is now heavily priced in for May.

Oil falls below $100 on SPR release

Oil prices are continuing to fall today, as we await an announcement from IEA regarding the coordinated SPR release following President Biden’s decision this week. Unlike on the previous two occasions, markets have responded favourably to the latest release, which is by far the largest ever from US reserves. The timing nicely coincides with the run-up to the midterms as well which I’m sure is merely a coincidence. Whether it has a significant impact in that time though will ultimately depend on the situation in Ukraine.

One thing it will do is increase OPEC+ resistance to boosting output, not that it has shown any ability to even deliver 400,000 barrels per day increases in recent months. Compliance increased to 151% in March, from 136% in February, meaning its new slightly higher targets will simply increase the amount in which it will likely fall short in May. At least the group isn’t being political in its decision making…

Gold eases lower after strong jobs data

Gold is a little lower at the end of the week, with the jobs report weighing a little as the dollar strengthened. It doesn’t really change much as far as the yellow metal is concerned as it remains range-bound, comfortably above $1,900 and seemingly going nowhere fast. Traders are happy to hold on but in no rush to buy, it seems.

Bitcoin failing to capitalise on Monday’s breakout

Bitcoin accelerated moves to the downside yesterday and has continued to do so again today as it wipes out all of Monday’s breakout gains. It now finds itself back below $45,000, albeit still in a fairly healthy position. The cryptocurrency rallied almost 20% from its 21 March lows but rather than capitalise on its break above $45,500 it appears to have induced some profit-taking. It’s slipped almost 10% from Monday’s highs so it will be interesting to see if traders are ready to pile back in or if they have no faith in the breakout.

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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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