Global Market Update: Oil Drops Below 3% As Saudi Price Cuts Increases Demand Uncertainty

Taiwo  Adekeye, FMVA

January 09, 2024

Oil prices fell by over 3% on Monday on sharp price cuts by top exporter Saudi Arabia and a rise in OPEC output that alleviated supply concerns generated by escalating geopolitical unrest in the Middle East. Brent crude settled down by 3.4% closing at $76.12 a barrel, while U.S. West Texas Intermediate crude futures lost was down by 4.1% to close at $70.77 a barrel.

Nigeria: CBN pays nearly $2 billion of FX backlog

Nigeria’s central bank has paid nearly $2 billion in outstanding foreign exchange forwards in the last three months in a bid to clear a backlog of dollars. However, forex shortages continue to hobble the country’s naira currency. Africa’s biggest economy has nearly $7 billion in forex forwards that have matured. Nigeria’s foreign currency shortages have been worsened by declining oil production, which is the country’s largest export, accounting for more than 90% of dollar inflows.

Zimbabwe: Gold output declines 15% amid electricity, forex shortages

Zimbabwe produced 30 metric tons of gold in 2023, 15% less than the previous year, as electricity cuts and currency volatility impacted output.  Output plunged to 3 tons in 2008, at the height of Zimbabwe’s political and hyperinflation crisis. Although production has recovered in recent years, hitting an all-time high of 35 tons in 2022. The country also experienced intensified power cuts due to frequent breakdown of its ageing coal-fired plants, while generation at the Kariba hydropower station continues to be throttled by low water levels.

Egypt: Inflation expected to decline in December

Egypt’s inflation rate probably fell for a third straight month in December on lower food prices, but may see an uptick in coming months after recent government price rises and a possible currency devaluation. Annual urban consumer inflation is seen edging down to 33.4% in December from 34.6% in November. Inflation has eased from a historic high of 38.0% in September, but inflation risks are growing again.

Brazil: Brazil’s industrial output exceeds expectations in November

Industrial production in Brazil rose for the fourth consecutive month in November exceeding market forecasts even as it maintained a trend of posting small monthly variations. In Latin America’s largest economy, output was up 0.5% in November from October, the highest level for the sequential figure in six months. Industrial output in Brazil has stuttered this year and had been practically stagnant since June, alternating between small monthly rises and drops as elevated borrowing costs took their toll on the sector.

India: India bonds may be included in Bloomberg EM index from Sept

Bloomberg Index Services on Monday proposed including eligible Indian bonds in its emerging market local currency index from September, a move that could lead to billions of dollars of inflows into the country. The proposal comes just a few months after JPMorgan said it would include India in its widely tracked emerging market debt index from June. The Indian government began discussing the inclusion of its securities in global indexes as far back as 2013 but restrictions on foreign investment in domestic debt hampered the process.