Natural Gas prices remains stable, but uncertainties remain

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Markets

• The benchmark NGX All-Share Index (ASI) inched up 61.23 (0.09%) points to close at 68,143.34, representing a week gain of 0.91%, 4-week gain of 4.31%, and an overall year-to-date gain of 32.96% Oando led the gainers with 10% share price appreciation closing at NGN 7.70 per share, followed by Computer Warehouse Group (+9.89%), Neimeth International Pharma (+9.8%) and Ikeja Hotel (+8.93%).

• Oil prices gained almost 1% to a nine-month high on Friday. Brent futures rose 73 cents, or 0.8%, to settle at US $90.65 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 64 cents, or 0.7%, to settle at US $87.51.

• Naira was up at both the I&E Window and on the streets. At I&E exchange, Naira appreciated by 1.92%, closing at N722.39 to the US dollar. On the streets, Naira was up by 0.22%, reaching a value of N925.00 against the US dollar.

• U.S. natural gas futures edged up about 1% to a one-week high on Friday on forecasts for hotter than normal weather through at least late September and as global gas prices jumped due to worries about a strike at U.S. energy firm Chevron's liquefied natural gas (LNG) export projects in Australia.

Natural Gas prices remains stable, but uncertainties remain

A steep decline in natural gas prices and higher storage levels have indeed provided some respite for global gas markets this year. As of the end of the first quarter in 2023, the prices of liquefied natural gas (LNG) in both European and Asian spot markets have dipped below the peaks seen in the summer of 2021. However, it is still "well above" historic averages, reflecting the ongoing complexities within the energy landscape.

Natural gas prices became a headline sensation in 2022, primarily due to Russia's decision to curtail its pipeline supplies to Europe, which sent gas prices soaring during the early months of the year but has since returned to more earthly price levels, declining lower than levels before the Russia / Ukraine crisis in some instances.

The benchmark US natural gas futures contract, which hinges on the physical delivery of the commodity at the Henry Hub in Erath, Louisiana, serves as a stark example. It was trading at approximately US$2.5 per million British thermal units (/MMBtu) in September 2022 —a level not seen since September 2020, compared to nearly $10/MMBtu reached in August 2022.

Since the start of this year, U.S. gas futures have dropped about 35%. However, outlook for gas markets in 2023 remains uncertain. Global gas supply is expected to remain tight throughout the year, while there may also be the potential impact of adverse weather events. Additionally, the possibility of further disruptions in Russian pipeline gas deliveries to the European Union remains a significant concern.

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National Headlines

• Trapped funds and ticket prices – Travelers from Lagos and Abuja international airports in the last three months have been confronted with about 300% – 400% difference in prices compared to those that fly from Cotonou airport in Republic of Benin and Kotoka airports in Accra, Ghana. It became common for Nigerians to pay an average of about US $2000 – US $3000 for return trips to Europe in the busy months of August and early September. It follows the lingering airlines trapped funds, now estimated at close to a US $1 billion. Speaking to an attendant in one of the airlines offices in Lagos, he said the airlines, not sure of when they will recover their trapped funds, are not only charging more in case they are not able to recover the trapped funds, but also that passengers are paying in US dollars. The new aviation minister recently said he will work on the matter in relation to Emirates.

• Fitch Ratings allude to Nigeria’s external risks – Fitch released its latest report on Nigeria, alluding to external risks, following Nigeria’s weaker net international reserves than earlier thought. While Nigeria’s recent exchange rate reform was expected to strengthen and attract foreign capital flows into the country, it has been undermined by recent revelation that Nigeria’s external reserve position is weaker than many had anticipated. In May, the ratings agency had put Nigeria’s rating at ‘B-‘ with a stable outlook. Since the revelation, the gaps between the CBN’s I&E exchange and the rates of on the streets have widened and supply has stalled. This uncertainty and volatility will continue to discourage capital inflows while the CBN struggles to improve the country’s external position.

Global Headlines

• The scramble for Africa’s metals – The Wall Street Journal and CNBC reported over the weekend that the United States and Saudi Arabia are teaming up to but strategic mineral assets in several African countries to help their economies with energy transition. They are expected to acquire mining assets of around US$15 billion in countries such as the Democratic Republic of Congo, Guinea, and Namibia. The race for the supply of cobalt, lithium and other minerals have heightened in the last decade because of their use in electric car batteries, laptops, and smartphones. In a similar arrangement in July, Saudi Arabian Mining Co and the Saudi Public Investment Fund acquired 10% of Brazilian Vale’s base metal unit, while U.S. investment firm Engine No. 1 acquired 3%.

This Week

• On Thursday, 14^th September 2023, The Nigeria Bureau of Statistics is expected to release the Q2’2023 Nigeria public Debt and the railway data for the same quarter

• On Friday, 15^th September 2923, the NBS will release the inflation report for the month of August.

• On Tuesday, 12^th September, the United Kingdom will release it unemployment data for the month of August. The unemployment rate in the UK increased to 4.2% in the three months to June 2023, the highest since late-2021 and above market forecasts of 4% and 4% in the previous period

• Also, On Wednesday, 13th September, the United State will release its inflation rate for the month of August. The unemployment rate in the UK increased to 4.2% in the three months to June 2023, the highest since late-2021 and above market forecasts of 4% and 4% in the previous period. The Consumer Price Index in the United States increased by 3.2 percent year-on-year to 305.691 points in July 2023, which was an acceleration from the 3.0 percent growth recorded in the previous month.