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Markets Today – Week Ahead, French Election, Oil, Gold, Bitcoin

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Gold - Investors King

France Outperforms After Weekend Election

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

European stocks are slipping again at the start of what is likely to be another very lively week in financial markets. 

That has very much become the norm this year for obvious reasons but this week has an interesting mix of central bank decisions, the start of earnings season and major data releases which will keep us all on our toes. And then of course there’s China, where restrictions are causing concern, property firms are back in the spotlight and policymakers could unleash some support after bold promises a few weeks ago.

Considering what’s to come, it’s no surprise that it’s actually been a relatively timid start to the week. Compared to what we’ve become accustomed to, of course. Interestingly, the CAC is the only major index in the green after the weekend’s first-round election, which saw Emmanuel Macron and Marine Le Pen progress to the second round in a couple of weeks.

The run-off between the two candidates is looking to be far closer than five years ago when Macron scooped two-thirds of the vote. While there is still plenty that could not bring themselves to vote for Le Pen as we saw in 2017, her softened image appears to have swayed others and while pols still favour Macron, some fall within the margin of error that makes Le Pen a realistic victor this time around.

While that would no doubt be bad news for Europe, it seems markets aren’t particularly concerned if today’s trading is anything to go by. Some have chosen to compare a Le Pen victory to Brexit and Trump, two events that were deemed to be a negative for stock markets before the vote but did not turn out to be so over time. Perhaps lessons have been learned.

Oil slides amid Chinese restrictions

Oil is off around 3% on the day, with Brent back below $100 and hitting its lowest level in almost four weeks. There has been a big effort to alleviate the pressures in the oil market in recent weeks which has no doubt helped but it’s the lockdowns in China that are driving the latest declines.

The country’s zero-Covid policy is naturally having a dampening effect on demand which is aiding the rebalancing efforts. Of course, this is just a temporary demand hit so the upside risks to the price remain but it is offering some reprieve for now. How widespread the restrictions become and for how long will determine the sustainability and severity of the declines.

Gold pares gains after facing resistance once more

Gold is up a little on the day but has given back the bulk of its gains from earlier in the session. Once again the yellow metal has run into resistance around the same region it did a few weeks ago and a recovering dollar has also weighed on it around those levels.

If it can break beyond here – an impressive feat considering we’re still seeing yields rising – then $2,000 becomes the next big test. Whether it’s inflation fears or risk aversion driving the move, we’re certainly seeing gold coming back into favour. Not that it ever really fell out of favour, even as risk appetite returned and interest rate expectations were ramped up considerably.

Further pain ahead for bitcoin?

Bitcoin is getting hit hard again on Monday, losing more than 4% and coming close to $40,000 where it could see some support. A break of this level could be a psychological blow. From a technical perspective, it would also mean a break of the 50 fib level – 2022 lows to highs – which could also be a negative signal. It will be interesting to see if these levels attract dip buyers as the breakout two weeks ago looked to be a very bullish move. But it’s all been downhill since then.

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Energy

African Energy Chamber to Host Energy Transition Forum at The 2022 Energy Week  

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Oil

African Energy Chamber (AEC) says it will host the Energy Transition Forum, in partnership with public and private sector organisations, government representatives, energy stakeholders and investors in October. 

In a statement made available to Investors King AEC stated that “The Energy Transition Forum will address critical issues such as the lack of adequate funding, the diversification of the energy mix, workforce development, and regulatory reforms necessary to enable Africa to expand its energy sector to address energy security, affordability, access, and sustainability matters”.

“With some 600 million people across the continent living in energy poverty and over 900 million without access to clean cooking, Africa needs to exploit all of its vast natural resources in order to make energy poverty history by 2030. In this respect, stakeholders across the continent are opting for an integrated approach to developing energy resources whereby every resource is utilized in order to kickstart economic growth and electrification. With over 125.3 billion barrels of crude oil, 620 trillion cubic feet of gas, and nearly 16.4 billion short tons of coal, the continent is well-positioned to drive economic growth,” it added. 

Executive Chairman of the AEC, NJ Ayuk, said: “With nearly 66 per cent of the world’s population living without electricity access based in Africa, the continent needs to ramp up the production of all its energy resources including gas, oil, wind and solar to ensure energy poverty is history by 2030. The AEC is honored to host the Energy Transition Forum at AEW 2022 where an African narrative of a just and inclusive energy transition that is fit for Africa will be developed. We will go from Cape to Cairo with a well-defined African message. Africans and the energy sector have a rare chance to define the narrative and we must.” 

The Energy Transition Forum is bringing together investors, regulatory authorities and energy market players to discuss the role of gas in Africa’s energy future and energy transition. The challenges of limited investments in gas exploration, production, and infrastructure development in gas-rich countries such as Nigeria, Algeria, Egypt, Niger, and Mozambique will also be addressed.

According to the AEC, climate change continues to impact Africa, leading to an increasing number of African countries such as Nigeria, Namibia, Morocco, South Africa, Uganda, and Kenya introducing policy reforms and initiatives to scale up renewable energy penetration in Africa. 

Investors King gathered that Nigeria has vowed to achieve climate neutrality by 2060 by increasing the share of natural gas and renewables in its energy mix while Namibia aims to make the development of hydrogen central to its energy policy. At the same time, South Africa has introduced its Hydrogen Society Roadmap to fast-forward the development of local content and hydrogen infrastructure whilst Morocco’s Law 13-09 and Egypt’s net metering scheme aims to expand distributed renewables development.

The chamber added that the AEW 2022, under the theme – “Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment” will feature high-level meetings and panel discussions where government ministers, investors, academia, and energy market stakeholders will discuss how Africa can attract funding to boost exploration, production and infrastructure development to ensure secure supply while remaining a climate champion. 

The African Energy Week is scheduled to take place from 18th – 21st October 2022 in South Africa at Africa’s premier event for the oil and gas sector.

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Siemens Announces Plan to Transit From Fossil to Sustainable Energy

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Siemens

Technology giant, Siemens Energy has announced a transit from fossil to sustainable energy through a management restructuring and shares evaluation.

This comes after the company launched a voluntary cash tender offer to acquire all outstanding shares in Siemens Gamesa Renewable Energy, or approximately 32.9 percent of Siemens Gamesa’s share capital which it does not already own.

Chairman of the Supervisory Board of Siemens Energy AG, Joe Kaeser, said: “The full integration of SGRE is an important milestone for Siemens Energy’s positioning as a driver of the energy transition from fossil to sustainable energy solutions.

“This will benefit customers, employees, shareholders, and ultimately society. It is critical that the deteriorating situation at SGRE is being stopped as soon as possible, and the value-creating repositioning starts quickly. The Supervisory Board strongly supports the Executive Boards plans for the integration of SGRE”.

According to a statement from the company, starting from October, the former gas and power segment will be divided into three business areas.

The largest of the new business areas, with sales of around 9 billion euros (9.6 billion dollars), is gas services. This included the gas and large steam turbine business and associated services.

It is followed by grid technologies with sales of 5.8 billion euros in the areas of power transmission and energy storage. The smallest business area is the transformation of the industry with sales of 3.9 billion euros.

Here, the focus was on reducing energy consumption and carbon dioxide emissions in industrial processes from hydrogen to automation and industrial steam turbines to compressors. Logistics, IT and procurement divisions were to be bundled together.

The removal of some levels of management at Siemens Energy was expected to bring faster decision-making processes. Where there were previously up to 11 levels in the firm’s hierarchy, there would be a maximum of six in the future. This would eliminate around 30 per cent of the previous management positions, Siemens Energy said. The employees affected would be given other tasks within the business, according to the statement.

Siemens Energy claims that after full integration, the combined group could see cost synergies of up to EUR 300 million within three years, owing to lower supply chain and logistics costs, aligned project execution, joint and integrated R&D efforts, and cost savings through an optimized administrative setup.

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NNPC, Sahara Group To Invest Over N150B in Two Gas Carriers

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Gas Exports Drop as Shell Declares Force Majeure

The Nigerian National Petroleum Company Limited (NNPC) and leading energy conglomerate, Sahara Group have taken delivery of two 23,000 CBM Liquefied Petroleum Gas (LPG) vessels at the Hyundai MIPO Shipyard in Ulsan, South Korea.

The new carriers, the MT BARUMK and MT SAPET, have brought NNPC and Sahara Group’s joint venture investment to over N150 billion ($300 m), bringing the Joint venture’s (JV) gas infrastructure pledge to $1 billion by 2026 closer to reality. MT Sahara Gas and MT Africa Gas were previously part of the fleet. Hyundai MIPO Dockyard, a leading global constructor of mid-sized carriers, produced all four ships.

Recall, Investors King reported that Nigeria earned $868.5 million from gas exports and N13.36 billion from domestic gas sales, according to an examination of the gas revenue statistics and other monthly reports acquired from the Nigerian National Petroleum Company Limited.

Data from the oil firm showed that the Federal Government, through NNPC, garnered the funds from the sale of Natural Gas Liquids/Liquefied Petroleum Gas, as well as Nigeria Liquefied Natural Gas feedstock.

West African Gas Limited (WAGL), a joint venture between NNPC and Oceanbed (a Sahara Group subsidiary), is driving NNPC’s five-year $1 billion investment plan which was announced in 2021, to expedite the decade-long gas and energy transition strategy.

To the joy of visitors, NNPC’s GMD, Mele Kyari, announced that an order for three more new vessels was being finalized, adding, “We have an objective of delivering 10 vessels over the next 10 years. In our energy transformation quest, the NNPC and our partners stand out for their integrity, and our commitment to environmental sustainability is steadfast.”

WAGL and Sahara Group have invested in the JV with MT BARUMK and MT SAPET. WAGL is strengthening its gas fleet and terminal infrastructure, while Sahara Group continues to make significant progress in the development of over 120,000 metric tonnes of storage facilities in 11 African nations, including Nigeria, Senegal, Ghana, Cote d’Ivoire, Tanzania, and Zambia.

“This is another epoch-making achievement for the NNPC and Sahara Group, and we remain firmly committed to delivering more formidable gas projects for the benefit of Nigeria and the entire sub-region,” Kyari said.

Executive Director Sahara Group, Temitope Shonubi stated that “WAGL has successfully operated two mid-sized LPG Carriers MT Africa Gas and MT Sahara Gas in the region in accordance with worldwide standards, transporting over 6 million CBM of LPG across West Africa, with the new vessels, we will be able to accelerate and lead Africa’s energy revolution.”

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