How the oil market fall impacts Angola’s economy

The oil-rich African country of Angola is bracing for the impact of the recent US oil price dip that has sent shockwaves through the global market. Rui Olvera, CEO of BFA Asset Management, shared insights on the situation during a recent interview with CNBC Africa. Olvera is currently in quarantine in Lisbon, Portugal, but remains in close contact with colleagues in Angola as they navigate this challenging period. Despite the panic surrounding the oil price decline, Olvera emphasized that the situation primarily affected WTI, not Brent, futures contracts, and highlighted the distinction between the two. He reassured that Angola's oil exports are not directly linked to the recent market turbulence. While there may be indirect repercussions on Brent prices and overall supply in Africa, the effects are expected to be gradual and may take several months to materialize. The looming issue of storage constraints facing the US market due to excess oil supply was also discussed. However, Angola's production levels and export-focused approach mean that storage concerns are currently not a significant issue for the country. Olvera advised caution in navigating the volatile market conditions and recommended separate evaluation of Brent and crude oil performance. Despite the challenges posed by the economic downturn, Angola has only confirmed 19 COVID-19 cases, with two fatalities, in a population of approximately 28 million. Olvera noted that the country's relatively low infection rate has not deterred investor skepticism, with Angola's euro bond facing significant downgrades in recent weeks. The uncertain economic outlook, exacerbated by the pandemic, has led investors to adopt a cautious stance towards the oil industry in Africa. Olvera highlighted potential shifts in investor sentiment later in the year, contingent on global market dynamics and Angola's response to the crisis. He underscored the significance of potential investor psychology shifts and the impact on Angola's status as a risky asset. The Angolan government has implemented measures to mitigate the economic fallout, including a quantitative easing initiative by the central bank to repurchase bonds with a four-year maturity. The bond repurchase program amounts to approximately 200 million, signaling a proactive stance to stabilize the economy. Olvera's assessment of the evolving situation in Angola reflects a delicate balance between economic resilience and external market forces. The country's ability to weather the storm will depend on sustained efforts to bolster investor confidence and navigate the uncertainties brought about by the current global crisis.