Oil Prices Rise By Over $1 On Potential Shipping Disruptions

Taiwo Adekeye, FMVA

February 27, 2024

Oil prices surged on Monday, driven by increased demand for European diesel constrained by Russian sanctions and shipping disruptions. The market experienced instability as U.S. refinery output was restricted due to planned overhauls. However, a decline in U.S. refining activity and disruptions to global trade have tightened diesel supplies in recent weeks. Brent crude futures increased by 1.11% closing at $82.53 a barrel while U.S. West Texas Intermediate crude futures (WTI) was up by 1.43% closing at $77.58.

Nigeria: Nigeria plans to merge and eliminate government agencies as a cost-cutting initiative.

Nigeria’s government has endorsed a plan to merge, scrap, and relocate several agencies to streamline its bureaucracy and cut costs. more than 20 government agencies will be merged, subsumed under existing ministries, or relocated. The Ecowas chairman who also doubled as the president of the country, President Bola Tinubu has put up a committee to ensure that necessary legislative amendments are made within 12 weeks to ensure the plan is fully executed. Additionally, Africa’s largest economy is grappling with sluggish economic growth, low revenue and rising public debt amid surging inflationary pressure.

Ivory Coast: Cocoa farmers are worried about continuous dry, hot weather.

Ivory Coast’s cocoa-producing areas experienced ongoing dry weather and high temperatures, sparking worries about the size and quality of the mid-crop from April to September. Ivory Coast, the world’s No 1 cocoa producer, is in its dry season which runs through mid-November to March, when rain is usually scarce. This heat wave caused by scarcity of rain is responsible for weakening some cocoa trees and slowing the growth of small pods. Abundance of rainfall is needed in the next two weeks to limit damage on plantations, protection of soil from becoming dry and to prevent buyers from rejecting beans during the mid-crop for poor quality.

South Africa: Rand sliding Southward ahead of data-filled week

South Africa’s Rand kept declining for another session on Monday, driven by the negative impact of the 2024 national budget on investor sentiment. The currency also weakened for two consecutive sessions on Thursday and Friday as the market digested the finance minister’s budget speech last week. This week, investors will be monitoring trade and budget balance data, producer inflation and private sector credit data. South Africa’s benchmark 2030 government bond was weaker, with the yield rising 10.5 basis points to 10.240% while the Rand traded at 19.3225 against the dollar, 0.16% weaker than its previous close.

Brazil: Brazil introduces FX hedge program for sustainable investments

Brazil’s finance ministry unveiled on Monday a program aimed at protecting potential investors and investors from currency risks in sustainable projects, comprising diverse initiatives and the offering of derivatives contracted by the Inter-American Development Bank (IDB) through the Brazilian central bank.  The essence of this great move is to encourage foreign investments in “green” projects in the country “so that the risks associated with exchange rate volatility are mitigated and do not hinder these investments, which are crucial for the ecological transformation. IDB would contribute $3.4 billion in derivatives and $2 billion in credit lines within the Brazilian government’s plan for foreign exchange hedges. Additionally, the monetary authority would act solely as an intermediary, assuming no form of risk, in the offering of derivatives.

India: India is contemplating imposing an export tax on low-grade iron ore. India, the world’s second-biggest crude steel maker is considering an export tax on low-grade iron ore after small steel producers urged the government to curb its overseas sales. Demand for steel in India has raised iron ore consumption in the country and just the beginning of this month, small steel producers petitioned the Ministry of Steel to take measures to restrict exports to ensure they are supplied at affordable rate to locals. However, China typically accounts for more than 90% of overall shipments of iron ore from India, which is the world’s fourth largest producer of the steel-making ingredient. Conclusively, Indian iron ore exports touched 32.2 million metric tons during the first nine months of the current fiscal year that began in April 2023, worth $2.7 billion from 9.5 million tons a year ago.