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Wednesday, 14 July 2021

Oil prices resume their advance, hit 2.5-year high

US oil hit its highest price in more than two-and-a-half years yesterday as the International Energy Agency warned of an intensifying supply crunch as prospects of OPEC+ agreeing to raise supply remain low, Bloomberg says. WTI futures in New York gained 1.6% yesterday to close to USD 75.25/bbl, the highest price since October 2018. Brent, meanwhile, rose back above USD 76/bbl for the first time since last week’s OPEC+ meeting, closing at USD 76.39/bbl, up 1.6%.

The International Energy Agency (IEA) has joined the chorus of voices warning about tightening oil supply, saying in a report yesterday that prices would remain volatile until oil producers agree to raise production, Reuters reports. “The OPEC+ stalemate means that until a compromise can be reached, production quotas will remain at July’s levels. In that case, oil markets will tighten significantly as demand rebounds from last year’s covid-induced plunge,” the energy body said. Lockdown-era production curbs have helped to push the price of oil up more than 50% so far this year amid surging global demand.

And about the possibility of a price war if Saudi Arabia and the UAE can’t find common ground: “The possibility of a market share battle, even if remote, is hanging over markets, as is the potential for high fuel prices to stoke inflation and damage a fragile economic recovery,” the IEA said.

Meanwhile, our biggest natgas customers are paying through their noses for shipments as supply tightens: Some areas of Europe are paying record gas prices as huge global demand, droughts and reduced output at US facilities last year combine to squeeze supply, the Wall Street Journal reports. The effects of huge Chinese demand are being intensified by a drought in Brazil, which has reduced the availability of hydroelectric power, and heatwaves in Canada and the Pacific Northwest.

The shortages are hitting places in Europe the hardest where prices are expected to remain high for another year, according to S&P Global Platts. A trading hub in the Netherlands has seen prices hit a record USD 13.10/mmBtu this month. “There just isn’t enough [liquefied natural gas] to supply Europe,” said one S&P analyst. “The LNG, of course predominantly coming out of the U.S., is being pulled into Asia and also into Latin America.”

Up EGX30 10,432 +1.9% (YTD: -3.8%)
None USD (CBE) Buy 15.64 Sell 15.74
None USD at CIB Buy 15.64 Sell 15.74
None Interest rates CBE 8.25% deposit 9.25% lending
Up Tadawul 10,735 +0.4% (YTD: +23.6%)
Up ADX 7,046 +0.3% (YTD: +39.7%)
Up DFM 2,760 +0.1% (YTD: +10.8%)
Down S&P 500 4,369 -0.4% (YTD: +16.3%)
None FTSE 100 7,124 -% (YTD: +10.3%)
Up Brent crude USD 76.39 +1.6%
Down Natural gas (Nymex) USD 3.70 -1.4%
Up Gold USD 1,809.90 +0.2%
Down BTC USD 32,554 -1.0% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 1.9% at yesterday’s close on turnover of EGP 1.35 bn (10.3% above the 90-day average). Local investors were net sellers. The index is down 3.8% YTD.

In the green: Fawry (+7.5%), Ezz Steel (+3.8%) and CIB (+2.5%).

In the red: Edita (-2.5%), Eastern Company (-1.4%) and Abou Kir Fertilizers (-0.4%).

Asian markets are reacting negatively to the unexpected jump in US inflation yesterday and are in the red this morning. It’ll be a similar story in Europe and the US later today according to index futures, which suggest that exchanges in both continents will fall in early trading today.

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