What’s wrong with oil?

15.11.2023

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Oil rose along with stocks on Friday but remained lower for a third week in a row on rising concerns about global demand and the end of the war risk premium between Israel and Hamas.

West Texas Intermediate crude rose steadily for most of Friday’s session and settled above $77 a barrel, up 1.9%.

Financial markets generally recovered from comments from Federal Reserve Chairman Jerome Powell that officials would not hesitate to tighten policy further.

Traders also shrugged off weak US consumer sentiment data, which showed long-term inflation expectations had reached a 12-year high.

However, concerns about declining demand and increasing supply are leading to long-term declines in oil prices.

“The futures market appears oversold,” Royal Bank of Canada analysts including Michael Tran wrote in a note.

“While oil prices may have near-term, asymmetrical upside potential, increasing concerns about slowing demand may be enough to dampen enthusiasm for a significant rise in oil prices in the coming weeks.”

In simple words, gentlemen, according to market laws, any asset cannot grow or fall all the time; there are so-called corrections.

Now, significant oil growth may be limited by the most important factor – a slowing global economy and rising inflation. All ups against a downward trend are just a short-term factor in internecine wars.

Yes, Russia and Saudi Arabia may intervene and reduce production even further, but, in our opinion, the bottom of the reduction has already been reached.

Market reviews

Gold’s meteoric rise amid Israel-Hamas war

The price of gold has recently seen a significant recovery, climbing over 1.0% to trade in the $2,660s per troy ounce. This resurgence is largely attributed to heightened geopolitical tensions following the Israeli army’s ground invasion of Lebanon, which has increased the demand for gold as a safe-haven asset. Several factors have contributed to the recent movements in gold prices.

Key Oil market moves to invest

Saudi Arabia is poised to shift its oil production strategy, moving away from its unofficial target of $100 per barrel. This change comes as the kingdom prepares to incrementally increase its monthly oil output, aiming to add a total of 1 million barrels per day by December 2025. This policy shift acknowledges the current weakness in oil prices and aims to stabilize the market while ensuring the kingdom’s economic stability through alternative funding sources.

Time to Invest in Chinese Tech Giants

The recent decision by the People’s Bank of China (PBOC) to cut interest rates has had a significant impact on the financial markets. This move, aimed at revitalizing the world's second-largest economy, has led to notable gains in Chinese shares and exchange-traded funds (ETFs).

Gas. Winter is coming!

Natural gas prices have been experiencing significant fluctuations due to various global factors. A decline in energy consumption in the US and Europe has put downward pressure on prices, while geopolitical tensions, particularly in the Middle East, have disrupted global trade and energy supplies. Additionally, Europe is grappling with the aftermath of an energy crisis triggered by the Russian invasion of Ukraine.

Bitcoin Uncertainty

Bitcoin (BTC) experienced a decline in early trading on Friday, September 6, following a more than 3% drop the previous day. Market participants had anticipated a 25 basis point reduction in the federal funds rate, which could potentially boost the legacy cryptocurrency. However, Bitcoin has fallen around 24% since its record high on March 14, due to a lack of new narratives to drive bullish sentiment.

Oil Market Shake-Up: Buy or Sell?

Oil prices have been trending lower recently, influenced by expectations of an increase in OPEC+ production from October. Also, signs of weak demand in major economies such as China and the United States have raised concerns about future consumption growth.

Gold and Silver are rising again

The gold market is currently experiencing positive momentum, with prices trading in favorable territory on the daily chart. Despite being constrained by a five-month-old ascending channel’s upper boundary and the all-time high, the overall outlook remains bullish due to recent events.

YEN’s Growth Ambitions

The USDJPY currency pair experienced a significant decline following Federal Reserve Chair Jerome Powell’s dovish remarks last Friday. This downward trend continued into the morning of August 26, exacerbated by escalating geopolitical tensions between Israel and Hezbollah over the weekend. Analysts from Oversea-Chinese Banking Corporation (OCBC), Frances Cheung and Christopher Wong, have noted these developments.