Oil Prices Slip $1pb On US crude Surge, Security Concerns

Taiwo Adekeye, FMVA

February 15, 2024

Oil futures dropped by $1 a barrel on Wednesday, driven by surging U.S. crude inventories as it pushes down prices coupled with a possible security threat to the U.S. that might dampen oil demand in the world’s largest economy. U.S. crude inventories was up by 12 million barrels hitting 439.5 million barrels last week. Brent crude futures closed at $81.60 a barrel, shedding $1.17 while U.S. West Texas Intermediate (WTI) crude futures settled at $76.64 a barrel, losing $1.23.

Kenya: The shilling continues to strengthen amid confidence in the repayment of Eurobond.

The Kenyan shilling extended gains on Wednesday, hitting its strongest in more than three months as confidence the government would pay off a Eurobond maturing in June boosted investors’ appetite. The shilling gained strength by over 3% against the U.S. dollar hitting 150.00/151.00, a level it last traded at on Oct. 26, compared with Tuesday’s close of 155.50/156.50 to the USD. However, Kenya sold a new $1.5 billion Eurobond maturing in 2031 and the confidence the 2024 Eurobond would be repaid had helped stop panic buying of foreign currency coupled with foreign inflows into a 70-billion-shilling infrastructure bond on sale and the central bank talking up the shilling as went hawkish on interest rates last week.

Nigeria: Nigeria to address power challenges by clearing debt and resolving gas shortages

The largest economy in Africa plans to fix its chronic power challenges by settling its outstanding debts of about $2.16 billion to energy producers and resolving gas supply shortages to generating firms. The nation has 12,500 megawatts of installed capacity but only produces about a quarter of that, making households and businesses, including manufacturers to resort to diesel and petrol generators.  outstanding debts, inadequate gas supplies and ageing equipment were the key barriers limiting optimal power output. Additionally, power companies are currently owed 1.3 trillion naira ($858.65 million), in addition to a $1.3 billion legacy debt from a decade ago.

Namibia Central bank maintains repo rate, keeps key forecasts unchanged

Namibia’s central bank kept its main interest rate unchanged for the fourth meeting in a row on Wednesday, maintaining to its forecasts for this year’s economic growth and inflation. The southern African country’s repo rate has been constant at 7.75% since June 2023, With it real interest rates remaining positive, slow credit growth, amid a fair level of international reserves. Inflation surged up to 5.4% YoY in January from 5.3% in December as It is projected to average 4.8% in 2024 while The bank sees the economy growing 3.4% this year, down from 3.9% in 2023.

Zambia: Zambia hikes key rate as inflation outlook dampens

Zambia’s central bank raised its benchmark lending rate for the fifth meeting in a row, due to a further deterioration in the inflation outlook. The bank raised its policy rate by 150 basis points to 12.5%. Inflation in the southern African economy surged to 13.2% YoY in January from 13.1% in December, moving further away from the bank’s 6%-8% target range. The main driver of the rising inflation is mainly the persistent depreciation of the local kwacha currency and the effects of bad weather on food prices. Additionally, the kwacha has set repeated record lows against the USD since November last year, dragged lower by factors including delays in restructuring the country’s debt and constrained foreign-currency inflows.

India: January wholesale prices surges marginally

India’s wholesale price in January rose at a slower pace than in the previous month, driven by easing of food prices and a sharper fall in prices of manufactured products. In January, wholesale price rose by 0.27% YoY, compared with a 0.73% gain in December.  In January, food prices were up by 3.79% YoY compared with an increase of 5.39% in December, manufactured product prices fell by 1.13% against a 0.71% decline the previous month while fuel and power prices fell 0.51% from a year earlier, compared with a 2.41% drop in December. Conclusively, Food prices fell due to seasonal winter effects on vegetables, Fuel and manufacturing prices have dropped due to global prices softening due to weak demand from China.