Oil prices are down a further 3% on Friday after a 5% crash on Thursday. It appears OPEC driven supply cuts are not sustaining prices as US shale Oil ramps up, Libya production hits and doubts surround the Russian cuts.
Forward contracts suggest the drop will be sustained or has further to go.
All this was predicted by Naira Insider weeks ago.
Big Oil companies in the last few days have announced good results proving that through cost cutting and efficiencies, they can continue production at under $50 per barrel prices.
All this adds up to bad news for the Naira.
The price inelasticity between oil and Naira will be proven yet again over the next few weeks and the Central Bank of Nigeria (CBN) will have to step in dramatically to defend the Naira.
The interesting questions now are; how long and how hard is the Oil price fall?
And how long can CBN continue to parachute dollars into the Naira market?
The fundamentals do not look good.
Saudi targeting Nigeria’s core Asian market with price cuts. Shale oil resurgent. OPEC deals discredited.
Kemi “the village bean counter” Adeosun will have her statements tested that Nigeria’s embryonic recovery from recession is based on policies not OPEC deals.
We reported this as delusional at the time and we will now see if it was the ravings of a incompetent person.
We predicted this first. Let’s watch and see.
The next two weeks are critical to see if fear moves from stalking the oil market to taking it over.