Oil market awaits OPEC+ consensus on 2021 policy

Oil prices are steady as the market pays attention to deliberations by producer club OPEC and its allies on the 2021 output policy. Back home, Nigerian equities have registered gains for the sixth consecutive session, sustaining their bullish momentum. Luke Ofojebe, Analyst at Vetiva Research joins CNBC Africa for more.

Tue, 01 Dec 2020 14:21:50 GMT

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AI Generated Summary

Nigerian equities have achieved gains for the sixth consecutive session, driven by a bullish momentum in the market.
The global focus is on the upcoming OPEC+ meeting where discussions regarding the 2021 output policy are expected to impact oil prices and the Nigerian market.
Despite challenges with compliance, Nigerian oil and gas companies are likely to face pressure to adhere to OPEC quotas in 2021, potentially influencing capital expenditure and output levels.

Nigerian equities have continued to rally, marking gains for the sixth consecutive session, propelled by a bullish momentum in the market. Luke Ofojebe, an Analyst at Vetiva Research, discussed the recent developments in the equity space during an interview on CNBC Africa. So far this week, the market has seen mixed trading with investors taking profits in some fundamental stocks while also showing negative sentiment towards others such as Zenith Bank and GT Bank. On the other hand, defensive stocks like telecom companies MTN and Airtel Africa have garnered positive sentiment, as consumers are expected to continue patronizing their products regardless of the economic conditions. Ofojebe predicts that the week may continue to see this mixed trading pattern with investors balancing profit-taking and positive trading on various stocks. Looking at the global landscape, the upcoming OPEC+ meeting is under scrutiny as the market awaits consensus on the 2021 output policy. With the recent developments in COVID-19 vaccines, there is hope for a gradual recovery in oil demand, although it may take time for global demand to return to pre-pandemic levels. OPEC members are likely to push for more cuts in 2021 to stabilize oil prices, which could bode well for the Nigerian market. However, Ofojebe notes that while this may boost sentiment in the fixed income space, the equity markets may still struggle to attract foreign investors due to lingering exchange rate risks. Although oil prices are not expected to surpass $50 in 2021, the anticipated recovery in the Nigerian economy could drive domestic participation in the equity market. Despite Nigeria's historical challenges with compliance to OPEC quotas, Ofojebe believes that pressure from the organization will continue in 2021, leading to stricter adherence from Nigerian oil and gas companies. While some companies may increase capital expenditure in response to higher oil prices, the overall impact on output may be limited as the OPEC+ cuts are expected to persist through the next year.