Oil prices in free fall, crumbles to $32.8
Oil prices have plunged even further since shedding 31 percent in a matter of seconds in Asia on Monday morning as the market hits the panic button over what is an all out price war between the world’s largest oil producers.
That’s the most oil prices have fallen since the Gulf war in 1991, in what is sure to set alarm bells ringing louder in oil-dependent Nigeria which risks a deeper fiscal crisis as a result of the abrupt price downturn.
Oil looks firmly headed towards projections made by Goldman Sachs, one of the most influential banks in commodity markets, which on Sunday lowered its price forecast for Brent to $30 a barrel for the second and third quarters, and warned there could be dips to $20 a barrel in the coming weeks.
Back at home, all eyes will be on Nigeria this morning to see how the financial markets react to tumbling oil prices, with many analysts predicting the worst sell-off in stocks, bonds and the currency since 2016.
Brent for May settlement tumbled as much as $14.25 a barrel to $31.02 on the London-based ICE Futures Europe Exchange. That’s the biggest intra-day loss since the U.S.-led bombing of Iraq in January 1991. It pared back some of those losses to $35.76 a barrel by 6:25 a.m. in Singapore, down $9.51.
Oil crash sends bond yields, currencies to unprecedented lows
For the first time, the 10 year US Treasury yield fell below 0.5 percent while the 30 year yield dropped under 1 percent.
Australian and New Zealand 10-year government yields also hit fresh lows.
The safe-haven Japanese yen surged across the board as emerging market currencies with exposure to oil, including the Russian rouble and Mexican peso, tumbled.
Energy stocks took a beating and E-Mini futures for the S&P 500 dived 4.89% to be limit down. EUROSTOXXX 50 futures fell 5.9% and FTSE futures 6.8%.
Japan’s Nikkei fell 5.2% and Australia’s commodity-heavy market 6.4%.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 3.9% in its worst day since late 2015, while Shanghai blue chips dropped 2.8%.
Saudi Arabia had stunned markets with plans to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that sent prices down by about two thirds.
Saudi Arabia launches oil price war after Russia deal collapse, Aramco shares slide
Saudi Arabia launched an aggressive oil price war Saturday targeting its biggest rival producers after Russia refused to join production cuts with Opec, in a move that threatens to swamp the crude market with supplies just as the coronavirus outbreak hits demand.
Saudi Arabia will raise production and offer its crude at deep discounts to win new customers next month, according to two people familiar with the country’s oil policy, which risks sending prices tumbling further. Oil prices had already dropped by a third since January to near $45 a barrel.
The kingdom plans to pump more than 10m barrels a day next month while announcing unprecedented discounts of almost 20 per cent in key markets, in an apparent attempt to punish Russia, while squeezing the US shale industry and other higher cost producers.
Production could eventually surpass 11m b/d, one of the people said, well above the roughly 9m Riyadh had previously proposed lowering its output to.
The fall in oil prices risks new turmoil in the kingdom, as MBS’s plan to modernise the economy relies at least in part on higher energy revenues to fund the transformation.
Shares in Saudi Aramco, the state oil company, dropped almost 9 per cent on Sunday, falling below its December stock market listing price. The broader Saudi stock market sank more than 8 per cent.
Saudi Arabia had last week sought the support of Opec and allies outside the cartel, such as Russia, for a substantial cut in production to stabilise the oil market, which has been reeling as the spread of coronavirus hits the global economy and saps demand for crude.
But Russia torpedoed the plan, eyeing an opportunity to hit US shale producers, infuriating the kingdom and resulting in the countries removing all restrictions on their output from April.
Crumbling oil price creates new jitters for Nigerian stocks this week
Nigeria’s stock market is in for a tumultuous week following developments in the global oil market.
Stocks sold off and Nigeria’s risk premium hit new peaks as investors demanded higher to hold Nigerian assets from local bonds to Eurobonds.
Lagos-based Vetiva Securities analysts expect the market to sustain this negative trading pattern at the beginning of the new week “amid fragile macroeconomic environment as oil prices continued to slide, coupled with the continuous threat pose by the fast spreading Coronavirus across the world”.
Trading activities on the Nigerian equities market closed on a negative note last Friday, as the NSEASI sank by 0.55 percent at the close of the session.
“We expect the market to witness the same sentiment in the next session,” FBNQuest analysts said in a March 6 note to investors.
NCC deactivates 2.2mn SIM cards
The Executive Vice Chairman, Nigerian Communications Commission (NCC), Umar Danbatta, has revealed that the commission has deactivated 2.2mn improperly registered Subscriber Identification Module (SIM) cards from all telecommunication networks nationwide. According to him, the NCC had since commenced the second phase of SIM deactivation based on the ministerial directive.
Danbatta said the commission’s efforts in this regard was in line with a key agenda of President Muhammadu Buhari to strengthen security of lives and property for all Nigerians.
“We have since initiated the second phase of SIM deactivation based on the ministerial directive. As at today (March 8), we have completely deactivated the remaining 2.2 million lines on the networks.
