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Oil Retreat Weighs on Asian Energy Stocks as Dollar Loses Ground

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Oil extended its retreat from a seven-week high and Asian energy shares declined, while the dollar weakened versus major peers as traders weighed prospects for a U.S. interest-rate hike this year. European equity index futures advanced.

Crude sank below $47 a barrel in New York, dragged down by possible increases in supplies from Iraq and Nigeria, and the MSCI Asia Pacific Energy Index of shares fell for a fourth day. The Bloomberg Dollar Spot Index snapped its biggest two-day advance in a month as South Korea’s won led gains in emerging markets. New Zealand’s currency strengthened after its central bank said the pace of interest-rate cuts in the nation will be gradual. U.S. Treasury bond volatility was near a 20-month low.

Financial markets have been dominated over the past week by speculation about the timing of the Federal Reserve’s next increase in borrowing costs and an air of caution is evident before Chair Janet Yellen speaks Friday at an annual symposium in Jackson Hole, Wyoming. Regional Fed presidents including William Dudley and John Williams indicated last week that a rate hike could come as soon as next month, while futures prices indicate a 51 percent chance of such a move this year.

“With investors waiting for Yellen, it’s unlikely that we’ll see a strong direction in the stock market,” said Toshihiko Matsuno, a senior strategist with SMBC Friend Securities Co. in Tokyo. Still, “oil, which had been rebounding, has started to correct again,” dragging down commodity-related shares, he said.

Preliminary gauges of this month’s manufacturing activity in the euro area and the U.S. are scheduled for release on Tuesday, while central banks in Turkey and Hungary have policy meetings. A report is also forecast to show sales of new homes in America held near an eight-year high in July.

Commodities

West Texas Intermediate crude for October delivery slid 1 percent to $46.92 a barrel as of 7:05 a.m. London time. Militants in Nigeria have made a proposal to end hostilities, a development that could boost the nation’s oil output, and Iraq is in the process of boosting crude exports by about 5 percent.

WTI crude jumped 9.1 percent last week, buoyed by speculation that informal talks among major producers next month will bring about an output freeze.

“We’re seeing a bit of profit-taking,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “There is still plenty of supply around. It wouldn’t be surprising to see this downtrend continue and it’s possible we could see some sort of basing around $44 to $45 a barrel.”

Gold held near a one-week low, while silver added 0.6 percent. Zinc advanced as much as 1.2 percent in London after Morgan Stanley said it was bullish and that demand from China’s steel industry would continue to support the price. The metal, which is used to galvanize steel, has surged more than 40 percent this year.

Stocks

A gauge of energy stocks on the MSCI Asia Pacific Index was down 0.9 percent, the biggest loss among 10 industry groups. Cnooc Ltd., China’s biggest offshore oil and gas producer, dropped by 1.2 percent.

Japan’s Topix index fell for the first time in three days, while Australia’s S&P/ASX 200 Index advanced to a two-week high. Hong Kong’s Hang Seng Index declined 0.3 percent and the Shanghai Composite Index gained 0.2 percent.

Trading volumes in Tokyo and Hong Kong were down more than 15 percent from their 30-day averages, according to data compiled by Bloomberg.

Futures on the Euro Stoxx 50 Index added 0.4 percent, while those on the S&P 500 Index were little changed. Contracts on the U.K.’s FTSE 100 Index gained 0.5 percent.

Currencies

The Dollar Spot Index lost 0.2 percent, after jumping 0.6 percent over the last two trading days. South Korea’s won strengthened 0.9 percent versus the greenback, rebounding from its weakest close of the month, and the Japanese yen rose 0.2 percent.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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OPEC Says Uncertainties Remain High in 2021

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OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Brent Crude Oil Rose to $56.25 Per Barrel

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Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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