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Crude contagion feared from weak emerging market currencies

Crude contagion feared from weak emerging market currencies

By Nick Cunningham of Oilprice.com

11 August 2018 – More than two weeks of nearly uninterrupted price gains for crude oil ended this week, with the rally running out of steam. The question is what happens next?

Oil prices posted steep losses just as the bulls were back on the march. WTI briefly topped $70 per barrel in recent days and Brent was flirting with $80. But the rally was kneecapped by a variety of factors, and it could be challenging to break above those key pricing thresholds in the near future.

“[A]lthough the timing of the price slide comes as a surprise – Brent dipped well below $76 for a time [on Thursday] – the slide itself does not, as expectations recently have doubtless been too optimistic,” Commerzbank wrote in a note. In fact, to some, the timing was not all that surprising – WTI faced technical resistance at around $70-$71, and having failed to break above that threshold, was forced back down.

But beyond the technical analysis, oil prices also face some questions on the fundamentals. The emerging market turmoil (some say crisis, or contagion) has not gone away. Currency problems continue to dog a long list of emerging market economies, pushing a few into, or to the brink of, recession.

In fact, the MSCI Emerging Market Index of equities officially fell into bear market territory on Thursday, and there is little sign of light at the end of the tunnel. “My fear of contagion is that right now the sentiment towards the whole emerging-market spectrum is very fragile,” Mario Castro, a Latin America currency strategist at Nomura, said in a Wall Street Journal interview.

Because much of global oil demand growth is concentrated in rapidly-developing economies, currency weakness could have an outsized impact on crude oil demand.

“The worries about demand and a possible spillover from emerging markets are weighing on prices,” Hans van Cleef, senior energy economist at ABN Amro Bank NV, told Bloomberg. “We have tested breaking higher, but that failed, so now we have a temporary setback. I still expect the market to turn higher at some point, probably driven by Iran.”

Meanwhile, the Trump administration is rumoured to be on the verge of dramatically ramping up the trade war with China, potentially moving forward on some $200 billion in tariffs. That would surely spark a response from China, and the back-and-forth retaliatory trade attacks could sap global growth. Also, China, specifically, is a major consumer of oil and one of the largest sources of demand growth, so a slowdown there could also go a long way to undercutting oil demand forecasts.

Also, this past week, the EIA reported weekly data that showed an uptick in gasoline inventories, a bearish sign that signals both an end to the [northern hemisphere] summer driving season and possibly hints at a slowdown in demand more generally. It’s one data point, however, so it doesn’t indicate a solid trend.

In fact, even as the markets sold off crude oil on the news, fearing a deterioration in the fundamentals, the reaction may have been overblown. “Gasoline demand growth has not been impressive in 2018, but total US oil demand growth has been stronger,” Standard Chartered said in a note. “As for the rest of the weekly data, it was negative but also unremarkable for late August.”

The softness in recent days has taken the wind out of the sails of crude oil, but it does not mean we are on the verge of another downturn. “The news backdrop does not really point to any further price slide: according to the DOE, US crude oil stocks declined by a surprisingly sharp 4.3 million barrels to 401.5 million barrels last week – their lowest level since February 2015. Things also remain interesting with respect to the Iran sanctions – particularly as far as the situation in India is concerned,” Commerzbank said. “We assume that New Delhi will bow to the pressure from Washington – so the supply situation on the oil market will remain tight.”

With two months to go on Iran sanctions, exports are falling fast. U.S. crude inventories are at their lowest point in years, and Saudi Arabia is going to be forced to burn through much of its spare capacity. U.S. shale, while signs of a production slowdown have yet to really materialize in the production data from the EIA, is still running into a rough patch. Just a few days ago, the CEOs of Schlumberger and Halliburton warned that drilling activity the Permian is cooling, which could translate into slower growth.

All of that is to say that while oil prices fell back at the end of this past week, it does not mean that we are in for another slide.

Syndicated Copyright: https://oilprice.com/Energy/Crude-Oil/The-Downside-For-Oil-Is-Limited.html


 

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Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.