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Markets Today – US Inflation, Oil, OPEC, Gold, Bitcoin

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Crude Oil - Investors King

Relief as US Inflation Offers Hope

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

European stock markets are heading for the second day of losses at the start of the week while the US is enjoying a boost following the latest inflation data.

I never thought I’d see markets responding positively to inflation rising 1.2% on the month and 8.5% on the year but these are not normal times. The headline numbers still don’t make for easy reading, especially for households that are continuing to see real incomes fall as a result of higher prices, particularly for energy and food.

But two things stand out from the report that is giving investors hope that inflation is peaking. One is that following months of the headline rate far exceeding expectations, today’s number was roughly in line which has come as a relief. The report has delivered a monthly blow to the markets for a long time now and that may be at an end.

More importantly, core inflation – which strips out volatile food and energy components – was much lower than expected on a monthly basis and a little below on an annual basis at 6.5%. Again, there isn’t much to celebrate about that number but the trend has been a major concern and this report suggests it may be about to improve.

After a period of US yields rising and markets pricing in an increasingly aggressive tightening cycle, the inflation data has come as a relief. Yields have slightly pared gains, the dollar has softened and stock markets have bounced back; particularly the tech sector which has once again been hammered as a result of rapid tightening expectations.

Of course, this is just one report. But it comes at a time when many expected inflation to peak so goes some way to confirming those views. A lot can obviously change and repeatedly has. But oil prices have eased in recent weeks thanks to the SPR release and lockdowns in China, among other things, which could be important.

Oil spikes as OPEC offers the EU little hope

Oil prices are spiking after flirting with sub-$100 levels in recent days as China appeared to loosen lockdown restrictions and OPEC warned that it would be impossible to replace Russian crude while pushing back against calls for it to utilise its spare capacity. This also came as it reported a decline in supply and demand growth this year and another missed month of production targets; something that the market expects after months of the same.

While the EU is continuing to push for higher output which would enable it to consider sanctions on Russian oil without severe economic damage at home – with current prices already causing problems – it seems it’s not going to be aided by the group that remains Russia’s ally in the OPEC+ alliance. With that in mind, the brief flirtation with double-digit oil may already be at an end for now.

Gold jumps as US inflation hits 40-year high

Gold is up around 1% on the day, buoyed by lower yields and a softening of the dollar in the aftermath of the inflation data. It seems that while the data brought some relief, it continues to drive demand for the yellow metal as a hedge against the highest price increases in more than 40 years.

Gold has now broken through the upper end of the range it traded within for much of the last month and could potentially have sights set on $2,000 where it could run into some resistance.

A minor rebound but support looks vulnerable

Bitcoin has had a tough time recently but is paring some of those losses today as it tries to hold above $40,000. A significant move below here would be another blow as it continues to experience substantial downside pressure. A 7% hit on Monday will have come as a bit of a shock but it occurred alongside a broader risk-off move in the markets. Perhaps more concerning is how minor the rebound has been which could cause a wobble in the near term.

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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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