…As Hardcore hedge fund bulls say Iran sanctions may see oil at $150***
Profit taking persisted on the Nigerian Stock Exchange (NSE) on Tuesday with market capitalisation shedding N40 billion.
The market capitalisation lost N40 billion or 0.31 per cent to close at N12.883 trillion compared to N12.923 trillion achieved on Monday.
Also, the All-Share Index, which opened at 35,399.28 lost 111.05 points or 0.31 per cent to close at 35,288.23.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that the market was likely to continue in the negative direction until after the political party primaries.
Omordion attributed the dominance of the bears in the market to the ongoing political anxiety surrounding 2019 election.
He said that the Senate decision to suspend planned meeting would further heat up the political environment as events unfold.
Omordion urged investors to go for equities with intrinsic value, especially stocks that paid interim dividend.
“We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improved company, economic and market fundamentals,’’ he added.
The News Agency of Nigeria (NAN) reports that International Breweries led the gainers’ table, with N1.75 to close at N35.20 per share.
NASCON followed with a gain of 55k to close at N20.50, while Custodian and Allied insurance added 51k to close at N5.64 per share.
Unilever gained 40k to close at N53, while UAC Property increased by 10k to close at N1.90 per share.
On the other hand, Flour Mills topped the losers’ chart, dropping N2 to close at N22 per share.
UACN trailed with a loss of N1.35 to close at N12.05, while Berger Paint dipped 75k to close at N7.20 per share.
Eterna Oil also declined by 75k to close at N6.50, while Northern Nigeria Flour Mills was down by 70k to close at N6.50 per share.
However, a total of 164.51 million shares worth N1.61 billion were traded by investors in 3,448 deals.
This was against the 160.43 million shares valued at N2.21 billion transacted in 3,120 deals on Monday.
United Bank for Africa was the most active stock with 26.87 million shares worth N250.66 million.
Lasaco Assurance came second with 12.24 million shares valued at N3.74 million, while FBN Holdings traded 11.45 million shares worth N108 . 94. million.
Fidelity Bank exchanged 8.29 million shares valued at N14.26 million, while Guaranty Trust Bank sold 7.48 million shares worth N289.74 million.
In the meantime, clouds are gathering over the outlook for the oil market as trade tensions and rising crude supply threaten to swamp demand growth.
However, some of the world’s most prominent energy investors are convinced the price will return to record highs at $150.
The escalating trade war between the United States and China threatens global growth.
The physical markets are already showing signs of strain as unwanted crude builds on ships and crushes prices for cargoes of oil.
Aside from that, interest rates around the world are rising and the dollar is strengthening, which means emerging market oil buyers are seeing their import bill growing almost daily.
Both OPEC and the International Energy Agency (IEA) warned about the risk of trade disputes to global demand growth in their most recent monthly market outlooks.
Funds have cut their bullish bets on Brent and U.S. crude futures and options to their lowest in almost a year.
Despite all this, prominent hedge funds such as Andurand Capital and Westbeck Capital are betting oil could skyrocket to $150 a barrel from around $75 presently.
The main driver is expected to be upcoming U.S. sanctions on Iran’s energy sector, which kick in in November.
“Our view is that by Nov. 4, we will have lost between 1.3 and 1.4 million barrels (output) a day. It is a very big number.
“That’s based on the view that the U.S. will allow few temporary exception waivers….ultimately.
“We could see losses from Iran exceed two million barrels a day,’’ Jean-Louis Le Mee, Chief Executive Officer of London-based Westbeck, said.
U.S. President, Donald Trump, in May walked away from a 2015 nuclear deal between world powers and Tehran that he said was one-sided in Iran’s favour.
Trump also blamed OPEC for the 45 per cent rise in oil prices over the last 12 months and, in June, exchanged sharp words with Iran on the subject.
Pierre Andurand, who predicted the rise and subsequent crash in the oil price in 2008, responded on Twitter by pointing out OPEC’s spare capacity was at its lowest ever.
He runs the $1.2 billion Andurand Commodities Fund.
“There is going to be a real issue,’’ he wrote, predicting prices above $150 per barrel within two years.
“We don’t sense a great deal of engagement yet from generalist investors.
“A few of them are starting to look at it now,’’ Will Smith, Westbeck Chief Investment Officer, said.
“This is going to catch everybody by surprise. Some of the specialists are bullish – including Pierre (Andurand), ourselves and Energy Aspects,’’ he said.
Andurand Capital declined to comment.
Taking a contrarian view can be costly. Even Andurand took a hit in 2017 when he expected the oil price to rally sharply and, instead, it was around the $50 mark.
Westbeck’s Energy Opportunity Fund is up 4.1 per cent in the year to July 13, showed an investor presentation shared with the media.
Andurand’s commodities fund is up 12 per cent in the first six months of 2018, according to data compiled by HSBC.
The oil options market shows that, for contracts from October 2018 to December 2020, traders and investors are holding more contracts to buy crude futures – or calls – at $100 a barrel than any other.