While Brent crude prices have remained steady above $60/bbl for the past Market Performance w/w two weeks thanks to the OPEC supply cuts, concerns over the slowing pace of global economic growth have capped crude gains. Meanwhile, amid the current price stability, political turmoil in Venezuela has surprisingly done little to raise prices, even as worries over the transition of power and control over the country’s oil assets have raised further supply concerns.
The country’s oil supply is expected to come under increased pressure, as reports suggest that the Trump administration is considering harsh sanctions on the country’s oil sector. Meanwhile, the U.S. Energy Information Administration (EIA) in its latest drilling productivity report projected shale growth of 0.06 mbpd in February, a significant but smaller increase than in previous months, suggesting a pullback on drilling activity from the U.S. shale industry. This falls in line with the views expressed by shale executives at the World Economic Forum in Davos.
Last week, the ASI rose 141bps with gains in four out of five sessions, bringing the losses for month/year down to 1bp. While the strong gains from last week create a high chance for bargain hunting across select stocks, we believe trading activities will remain tilted towards buying as more investors begin to take positions in beaten-down stocks in anticipation of dispersion in political clouds post-elections.
FCMB gained 22% w/w after gaining in all five sessions last week. The stock recorded an almost 10% gain in Friday’s session to close at ₦2.15, its highest price since July 2018, and is up 14% YTD (Banking sector: +2% YTD).
Whilst we anticipate tepid trading in the T-bills space this week due to liquidity constraints, we foresee modest sell-offs in the bond space as investors prepare to partake in the bond auction scheduled for Wednesday.