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West-Saudi Tensions Lift Safe Havens; World Stocks Slip

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Saudi Arabia Deputy Prince
  • West-Saudi Tensions Lift Safe Havens; World Stocks Slip

Major stock markets slipped on Monday as rising tensions between Western powers and Saudi Arabia added to concerns over the pace of global economic growth, with investors flocking to traditional safe-havens like the Japanese and Swiss currencies, as well as gold.

Oil prices were little changed as the Saudi-West rift more than offset concerns over slowing demand for oil in the long term.

The yen JPY= touched a one-month high versus the greenback and the Swiss franc CHF= rose for the fourth session in five while gold XAU= hit its highest since late July.

Saudi Arabia’s King Salman on Monday ordered an internal probe into the unexplained disappearance of Jamal Khashoggi as a joint Turkish-Saudi team was expected at the Saudi consulate in Istanbul where the journalist and dissident was last seen on Oct. 2.

Turkish police have audio showing Khashoggi was killed at the consulate, sources told Reuters.

Over the weekend, prominent business people including JPMorgan’s (JPM.N) CEO Jamie Dimon and Ford (F.N) Chairman Bill Ford canceled plans to attend an investor conference later this month in Saudi Arabia, the world’s largest oil exporter.

U.S. crude CLc1 rose 0.55 percent to $71.73 per barrel and Brent LCOc1 was last at $80.72, up 0.36 percent on the day.

“If the Saudis don’t come to the rescue when the Iranian sanctions kick in… it’s going to be a very under-supplied market. That was the fear that was initially driving prices higher,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

On Wall Street, major indexes were mixed, with defensive sector stocks rising after soft retail sales data. Apple (AAPL.O) was among the largest drags after a warning from Goldman Sachs regarding overall consumer demand from China.

The Dow Jones Industrial Average .DJI rose 126.36 points, or 0.5 percent, to 25,466.35, the S&P 500 .SPX lost 2.88 points, or 0.10 percent, to 2,764.25 and the Nasdaq Composite .IXIC dropped 4.89 points, or 0.07 percent, to 7,492.01.

The pan-European FTSEurofirst 300 index .FTEU3 rose 0.20 percent and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.05 percent.

Emerging market stocks lost 0.72 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 1.04 percent lower.

Japan’s Nikkei .N225 slumped 1.9 percent. Washington said it would seek a provision about currency manipulation in future trade deals with Japan.

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

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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