Market News

• Forex reserves sustain rally to $38.2 billion

The global oil market navigated a web of conflicting signals, as a shifting interplay of global events, supply expectations, and economic changes made investors uncertain and cautious.

As a result, brent crude price swung within a tight band, ultimately inching up by 2.4 per cent week-on-week to $64.52/bbl.

At the start of last week, oil prices got a small boost after the U.S. and China agreed to pause their trade dispute for 90 days, raising hopes that renewed talks could support global demand. But those early gains faded by midweek as the market faced a wave of negative news.

Analysts at Afrinvest said one of the main concerns was the increasing chance of a nuclear deal between the U.S. and Iran, which could lead to more Iranian oil entering the market. Reports suggested that up to 400,000bpd might return if sanctions are lifted, causing traders to quickly adjust their expectations.

Also, the International Energy Agency dampened optimism further by slashing its demand growth outlook for the rest of 2025. It now expects demand to grow by only 650,000bpd down sharply from 990,000bpd in first quarter, citing mounting economic headwinds and surging global adoption of electric vehicles.

On the domestic scene, Central Bank of Nigeria (CBN’s) external reserves increased slightly by 0.4 per cent week-on-week to $38.2 billion as of May 12, 2025. However, the Naira posted mixed performances across market segments. In the parallel market, the CBN rate closed flat at N1,620 per dollar, an improvement from previous week‘s close supported by the apex bank‘s recent interventions. On the other hand, the official market rate weakened by 0.5 per cent to N1,599.99 per dollar.

 “Looking ahead, we anticipate that the Naira will remain within this range in the near term, supported by ongoing CBN reforms and expectations surrounding the upcoming MPC meeting,” analysts said.

Extending last week‘s trend, system liquidity stayed depressed at a negative N182.6 billion. This shortfall was largely driven by ejection of N1.4 trillion through the Standing Deposit Facility (SDF).

The overnight (OVN) rate inched higher by one basis point to 27 per cent, driven by a weaker liquidity balance at the start of the week, undermining the N220 billion inflows from FGN bond coupon payments and net Cash Reserve Requirement credits of N57 billion.

Accordingly, the average system liquidity settled at a lower net long position of N230.04 billion, compared with a net long position of N915.26 billion in the previous week.

In the secondary T-bills market, performance was bearish as the average yield across tenors advanced 41 basis points to 21.4 per cent. This was driven by higher demand, particularly on the short and mid-term instruments with a yield uptick of 0.2 percentage points and 1.2 percentage points to 18.8 per cent and 21.4 per cent respectively. Conversely, the long-term segment of the yield curve contracted 0.2 basis point to 23.9 per cent.

Analysts said they expected the market performance to be influenced by cautious sentiment.

Meanwhile, oil settled higher at the weekend notching a second straight week of gains on easing U.S.-China trade tensions, although prices were held back by expectations of higher supply from Iran and OPEC+.

Brent crude futures settled up 88 cents, or 1.4 per cent, at $65.41 per barrel, while U.S. West Texas Intermediate (WTI) crude futures closed 87 cents, or 1.4 per cent higher at $62.49. The benchmarks posted a weekly rise of 1.8 per cent and 2.4 per cent respectively.

The contracts fell by more than two per cent in the previous session on the prospect of an Iranian nuclear deal, which could result in an easing of sanctions that could see Iranian crude return to the global market.

„Expected increases in OPEC+ oil production along with a more probable Iranian nuclear agreement has re-surfaced the bear trade,“ said Dennis Kissler, senior vice president of trading at BOK Financial.

„Near term, with geopolitical temperatures cooling, a strong seasonal travel demand will be needed in the coming months to counter the expected rises in supplies,“ Kissler added.

ING analysts wrote in a note that a nuclear deal lifting sanctions would allow Iran to increase oil output, resulting in additional supply of around 400,000 barrels per day.

Investor sentiment was boosted this week by the U.S. and China, the world‘s two biggest oil consumers and economies, agreeing to a 90-day pause on their trade war during which both sides would sharply lower trade duties.

The hefty reciprocal tariffs had raised concerns about a sharp blow to global growth and oil demand.

Analysts at BMI, a unit of Fitch Solutions, said in a research report, however, that „while the 90-day cooling off period leaves the door open for additional progress on lowering trade barriers on both sides, the uncertainty on longer-term trade policy will limit price upside.“

Keeping a lid on supply additions, Kyiv and Moscow failed to agree to a ceasefire at their first direct talks in more than three years, with Russia presenting conditions that a Ukrainian source described as „non-starters“.