Expectation of an Agreement at OPEC+ Sends Oil $40/BBL


With the expectation that at the OPEC+ meeting Russia and other major oil producers might agree to another one-month elongation agreement of its cut on oil output, we have witnessed quite a rally on oil prices as oil price has gone past $40/bbl. It is worth noting that despite fears of a second wave of infections coming back around and oil prices at this level, the $40/bbl is still below what most OPEC+ members need to cover their government expenditure.


Despite the slew of risk surrounding the U.S markets which include, the U.S-China relations and the civil and political unrest on the horizon stocks traded at the three-month high as businesses have continued to reopen around the world with most manufacturing gauges showing most economies stabilizing after the coronavirus lockdowns and leading to most analyst looking and betting at a V-shaped recovery in the markets. The ten-year treasury yield ticked up to 0.70% in Wednesday trading while we saw the S&P 500 close Tuesday at its highest level since early March trading 9.10 points or 0.3% higher at 3,086.25, while the NASDAQ -100 futures gained 22.25 points to reach 9,670, which is a rise of over 0.2%.


With the expectation that the EU may be announcing a bigger than expected €750 billion stimulus, European stocks open higher on Wednesday, the Stoxx Europe 600 index SXXP, 1.14% rose 1.1% to 363.81, after closing 1.6% on Tuesday, with the German DAX, 1.88% nearly 2% and the French CAC 40 PX1, 1.12% gaining 1.9%. The FTSE 100 index UKX, 0.85% climbed 1.4% as well.


In the Emerging Market Bonds Sphere, couple of headliners made the rounds with Sharjah, a sheikdom in the UAE, raising $1 billion from a 7-year sukuk due to mature on the June 2027. Despite S&P Global ratings lowering Sharjah’s outlook to negative last month, this new issue has done significantly well since its issuance which may be coming on the back of the gains from oil prices.


In the SSA space, Nigeria dominates the news after its senate raised their benchmark crude price in its 3 year medium-term spending plan to $28/bbl from $25/bbl with the expectation that prices would range between $40/bbl and $45/bbl post the OPEC+ meeting on Thursday, with hopes of an elongated cuts on oil output amongst oil producing nations which should sound good for the rest of their financial year. Yields on their sovereign curve dropped c.30bps yesterday on the back of rallies seen in oil prices.