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Stocks Lower After US Data, Patient RBA, GBP Testing 1.35 Ahead of BOE, Awaiting OPEC+ Decision, Exxon Investing in New Wells, Gold Rallies Above $1800, Bitcoin Hovers

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Oil

By Edward Moya, Senior Market Analyst, UK & EMEA, OANDA

US stocks are getting pulled all over the place as investors digest both a wrath of economic data and a chorus of Fed speak that has de-escalated aggressive tightening fears for now.  Impressive earnings from UPS and Exxon helped risk appetite early but that faded quickly as traders remain fixated over everything about inflation.  For about 10-minutes much of Wall Street took a break to hear the news that Tom Brady announced his retirement.  

Equities extended their declines after the ISM manufacturing report and JOLTS data showed inflationary pressures intensified.  The ISM, JOLTs, and construction data all support the economy is in a good place, except for the 800-pound inflation gorilla in the room.  The ISM prices paid index soared to from 68.2 to 76.1 and the JOLTS data showed the labor market remains super tight as job openings rose to 10.93 million, much higher than the consensus estimate of 10.3 million. Pricing pressures are still ascending at a pace that should concern the Fed and wage pressures are only going to get hotter as the number of job openings increase.

Before the US economic data, a lot of traders were thinking it is time to forget about a half-point rate hike in March, unless inflation gets significantly hotter.  Wall Street was starting to lean towards a 25-basis point increase in March, but that won’t remain the base case if wage pressures and prices paid continue to soar.  For risk appetite to reassert itself, investors need to be convinced that the Fed will not become too aggressive in tightening policy.

RBA

The Reserve Bank of Australia (RBA) kept rates steady and decided to discontinue its bond buying program this month.  The Australian dollar initially declined over the dovish surprise as the central bank decided to take a patient stance with inflation, noting they will continue to monitor it and showed no urgency to deliver rate hikes. The bank made it clear that ending QE does not mean rate increases are imminent.

BOE

The Bank of England is expected to deliver another rate increase, this time lifting rates by 25 basis points to 0.50% and signal that more are coming.  The BOE has telegraphed that they will reduce the size of the balance sheet once interest rates are back to the 0.50% level. The ending of bond reinvestments would mean that £25 billion of gilts would not be bought this fiscal year. The bank is getting closer to selling bonds, but that might not happen until the summer.

Oil/Exxon

Crude prices edged lower ahead of the OPEC+ meeting on output and after Exxon’s quarterly update showed the oil giant was ready to significantly increase its investment in new wells.  Fears of an OPEC+ surprise has many energy traders locked in profits. OPEC+ is expected to stick to the script and deliver a 400,000 bpd increase next month and when you factor in that many members are struggling to hit their quotas, oil seems poised to head higher.  Fears of disruption to supplies will remain elevated given the winter blast hitting the north and the geopolitical risks abroad.

WTI crude seems poised to resume its bullish trend as long as the Saudis don’t pull a surprise at the OPEC+ meeting and make a push for a larger increase over output. The Saudis are seeing US drillers are beginning to invest in new wells and that could trigger some market share fears.

Exxon delivered impressive results as revenue surged over 80% year over year and profit posted the best gain since 2014.  The oil giant is going to have a strong year as they continue to focus on cost cutting and buying back shares, while benefiting from a new lower breakeven oil price fell to $41 a barrel.  Exxon is boosting its spending on new wells by as much as 45%.  The company narrowed its capital expenditure guidance for the year, which still supports a significant investment in new wells.

Gold

Gold is bouncing back as expectations for aggressive global central bank tightening eased after the RBA showed they are in no rush to raise rates and as some traders doubt the Fed will kickoff tightening with a half-point increase.  The Fed’s Harker signaled that he currently supports the idea of four 25 basis point increases this year and is not convinced they should start with a 50 bps increase in March.

Gold also got a boost on fears that nonfarm payrolls would have a big miss after White House press secretary Psaki said around 9 million people called out sick in early January.

Gold fell to session lows after the ISM and JOLTS data sparked inflationary fears, sending the 10-year Treasury yield back above 1.80%.  Gold is hovering around $1800 but if selling pressure returns, it could get ugly quick as momentum sellers are watching.

Bitcoin

Bitcoin will continue to trade like a risky asset and most likely benefit if central banks continue to show some hesitancy in turning very aggressive with tightening monetary policy.  The BOE and ECB rate decisions might have a larger impact on cryptos than normal as Wall Street is looking for a cue on which direction risk appetite is headed. A lot of January data in the US is expected to be soft and that should continue to support the Fed’s growing chorus of members that want an interest rate increase cycle that does not disrupt the economy.

Bitcoin should continue to stabilize here but if it breaks $40,000, that would surprise many traders and could see some bullish momentum.

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Energy

Nigeria Partners with ECOWAS and Morocco to Launch $26B African Gas Pipeline

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Gas-Pipeline

The Nigerian government, in partnership with the Economic Community of West African States (ECOWAS), Morocco, and Mauritania, has announced plans to advance the $26 billion African Atlantic Gas Pipeline project to drive economic growth across Africa.

This development was revealed on Monday, November 5, by Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), at the ECOWAS Inter-Ministerial Meeting on the Nigeria-Morocco Gas Pipeline Project.

Speaking at the meeting, which was attended by ECOWAS Ministers of Hydrocarbons and Energy as well as representatives from Morocco and Mauritania, Kyari stated that, once completed, the project will connect 13 African countries.

Represented by Olalekan Ogunleye, NNPC’s Executive Vice President for Gas Power & New Energy, Kyari said this will be Africa’s largest pipeline project.

Ogunleye confirmed that progress has been made with the front-end engineering design completed, the phase two study finalized, and work ongoing for environmental and social impact assessments as well as land acquisition and resettlement.

He emphasized NNPC’s readiness to execute the project: “Today, we come together to make significant progress in the African Atlantic gas pipeline project, which is a transformative initiative connecting at least 13 African nations in shared prosperity and development. These achievements underscore our capability to deliver this landmark project, supported by strong regional collaboration.”

Ekperikpe Ekpo, Minister of State for Petroleum Resources (Gas), described the project as a game-changer for the regional economy, stating, “We stand at a critical juncture where these agreements can reshape our energy landscape, strengthen our economies, and uplift our people.”

He also highlighted that the project will increase Africa’s presence in the global gas market, noting that “the agreements demonstrate a strong commitment to advancing hydrocarbon and energy trade across ECOWAS, enhancing access to natural gas in West Africa, and expanding Africa’s global footprint in the gas market.”

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Crude Oil

Nigerian Army Seizes 700,000 Liters of Stolen Petroleum in Sweeping Raid Across Four States

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In a series of raids across Rivers, Bayelsa, Akwa Ibom, and Delta states, troops from the 6th Division of the Nigerian Army seized 700,000 liters of stolen petroleum products, sealed 29 illegal refining sites, and arrested 24 suspected oil thieves.

In a statement issued by the Division’s Public Relations Officer, Lt. Col. Danjuma Jonah, it was noted that 14 boats involved in crude oil theft were also destroyed during the operation.

Jonah disclosed that the raids were conducted between October 28 and November 3, 2024.

He revealed that the troops intercepted a large wooden boat carrying over 150,000 liters of stolen crude oil in the Kula area of Akuku-Toru Local Government Area of Rivers State.

Providing a breakdown of the operation, Jonah stated, “Another boat carrying 50,000 liters of crude oil was seized, while three illegal refining sites were dismantled, and cooking pots containing 20,000 liters of stolen diesel were confiscated. Troops also dismantled ten illegal refining sites in Kay and Abesa in Akuku-Toru LGA, seizing 400,000 liters of illegally refined diesel.”

In Bayelsa State, soldiers deactivated two illegal refining sites at Boma Creek in Southern Ijaw LGA, recovering storage tanks holding over 2,500 liters of stolen crude. Similarly, operations in Obughene Creek in Southern Ijaw yielded over 4,500 liters of stolen crude, while another 3,000 liters of illicit product were seized at West Boma Creek.

In Akwa Ibom State, troops intercepted two Toyota Camrys loaded with illegally refined diesel, concealed in nylon bags, totaling 3,000 liters. The vehicles were stopped along the Ikot Abasi-Abak road, and the drivers were detained.

In Delta State, multiple raids were conducted, including the interception of a tricycle in Kwale, Ndokwa West LGA, carrying stolen iron pipes allegedly taken from decommissioned Oando pipelines.

Another raid in Patani town uncovered a storage dump containing 40 jerricans of stolen products, while troops patrolling Uro Community waterways intercepted a wooden boat with 200 sacks of premium motor spirit,” he concluded.

The statement added that suspects arrested during the raids have been handed over to relevant authorities for prosecution.

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Crude Oil

OPEC+ Supply, Trump-Harris Election Face Off Lend Support to Oil Prices

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Crude oil

The decision of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ to delay plans to increase output for another month and the close call of the presidential elections in the United States triggered a 2 percent rise in oil prices.

Brent futures were up $1.98, or 2.7 percent at $75.08 a barrel while the US West Texas Intermediate (WTI) crude rose $1.98, or 2.85 percent to $71.47.

OPEC+ said it would extend its output cut of 2.2 million barrels per day for another month in December at a meeting on Sunday.

Saudi Arabia and Russia, as well as Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates (UAE) agreed to extend the November 2023 voluntary production adjustments of 2.2 million barrels per day for one month until the end of December 2024.

The move is aimed at boosting oil prices amid uncertain demand and accelerating supply, with an eye on the imminent US presidential election, though analysts predict a limited impact.

Also speaking on Monday, OPEC’s Secretary General, Mr Haitham Al Ghais said on Monday that OPEC remains very positive on demand for oil in both the short and long term.

The market has also shifted focus to the American presidential election between Democratic presidential nominee and current Vice President, Kamala Harris and Republican Donald Trump on Tuesday (November 5).

So far, the outcome has shown that the election is tight as it could take days after voting ends to know the eventual winner.

The market will also be looking at the developments in the Middle East, especially with anticipation that Iran was preparing to attack Israel from Iraq within days.

Markets were also watching a new tropical storm that was forecast to form on Monday in the Caribbean and threaten offshore oil production along the Gulf of Mexico.

Oil companies like Shell have moved its non-essential personnel from six platforms, adding it currently expects no other impacts on its production across the Gulf of Mexico.

There will be anticipation of what the US Federal Reserve will do at the next meeting on Thursday with expectations high that the US central bank will cut interest rates by 25 basis points.

Also, investors will be looking to China where the government is expected to approve additional stimulus to boost the slowing economy in the world’s largest oil importer.

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