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Market | Commodities

NCM 2021: Energy Sector Took an Upward Trajectory in 2021 After a Big Hit in 2020

Mar 14, 2022   •   by Proshare Research   •   Source: Proshare   •   eye-icon 156 views

Tuesday, March 15, 2022 / 04:40 AM / by Proshare Research/ Header Image Credit:  EcoGraphics

 

Commodities Market Review

 

Oil

The energy sector in 2021 took an upward trajectory after taking a big hit in 2020 from the devastating blow across the markets by the coronavirus pandemic. With increasing vaccination rate, reducing restrictions from the pandemic and a global economic jumpstart, one commodity which was largely affected was Oil. With increasing demand spurred by increasing economic activity, the stage was set for a continuous price surge from 2020.

 

The year started with a price of $51.09 per barrel and sustained the tempo throughout the year. Demand had outpaced supply with economic recovery speeding up after a near-halt of global economies in 2020 as the virus spread from China to all other countries in the world. Global production also increased slower than the demand required causing an increase in prices of inventory of oil.

 

This drop in production was mostly attributed to OPEC's crude oil production cut which started late in 2020.

 

OPEC alongside other countries that coordinate production with OPEC (together called OPEC+), announced that reduction in crude oil production would come about in 2021 to support higher crude oil prices. Their mission in 2021 was successful as prices rose to a high of $86.4 per barrel in October 2021

 

Late November 2021 saw a fall in prices of oil as new variant (Omicron) of the Covid-19 virus began spreading, causing fears that there could further be lockdowns that would further reduce demand.

 

The prices may have also been affected by the downward pressure caused by the announcement of the US indicating that a release of about 50 million barrels of crude oil from their strategic petroleum reserve would soon be taken.

 

With other nations agreeing to also release from their strategic reserves, crude oil prices took a temporary fall in November into December 2021.

 

Chart 10Brent Crude Price Movement (Jan- Dec)

Proshare Nigeria Pvt. Ltd.

Source: CNBC, Proshare Research

 

Agriculture

 

AFEX Commodities Performance

The AFEX composite index (ACI) had a value of 388.95 points in February 2021, tumbling to 381.89 points in May. Market activity in February for maize, soybeans, and paddy rice was characterized by a marked increase in price volatility for all commodities in the local markets as stakeholders engaged in bargain.

 

Table 70: M-0-M Price Movement for Maize, Cocoa and Ginger(Jan- Dec)


 

In March, the ACI appreciated slightly, but depreciated in April, hitting 381.89 points. By the end of June, the ACI settled at 502.04 points. The index performance rose in response to the positive market performance of the soybean, maize, and paddy rice sub-indexes.


Local market activity in June for maize and paddy rice was marked by a double-digit percentage price increase, with market activity for maize being one of the most pronounced commodities. The open market prices for sorghum, paddy rice, maize and ginger surged in response to the lean season of the crop calendar in the agrarian North which indicates a continued depletion of market stocks from the last planting season which was terminated in December 2020. ACI in August stood at 423.01 points.

 

In September, local market activity increased only for soybeans while paddy rice experienced its highest decline in a year a 7% price decline. ACI settled at 427.34 points.


The month of October witnessed a drastic drop in prices of Soybeans as it had its first and only double-digit decline, dropping in about 48% in price far ahead of Ginger and Maize which dropped 19% and 12% respectively.


By December 2021, the ACI had its second highest rise, settling at 456.92 points as of December 29th, 2021. An impressive +29.5% growth Y-o-Y (see Chart 11 and Chart 12).

 

Chart 11: ACI Composite M-o-M(Jan- Dec)

 Proshare Nigeria Pvt. Ltd.


Source: AFEX, Proshare Research

 

Chart 12: M-0-M Price Movement for Maize, Cocoa and Ginger(Jan- Dec)

Proshare Nigeria Pvt. Ltd.


Source: AFEX, Proshare Research

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