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Markets Today – Ukraine, UK and China Inflation, Fed Minutes, Oil, Gold, Bitcoin



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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Stock markets are a little flat on Wednesday as we await the Fed minutes and digest more inflation data from China and the UK.

We saw a strong rebound on Tuesday as some Russian troops completed military drills near the Ukrainian border and returned to their normal bases in what was the first de-escalation in the region in weeks. It came at a time when various world leaders were warning about the threat of invasion this week, something Russia repeatedly denied.

Friday’s warnings carried an additional urgency that triggered a sell-off late in the day and saw oil, gas, and gold rally. We’ve since seen some of those positions being unwound as the threat of conflict appears to have reduced. But with the threat level still relatively high, there’s still a certain amount of risk premium in the markets. Especially with NATO and Ukraine suggesting they aren’t seeing evidence of troops withdrawing yet.

We’re basically drifting from one crisis to another at the minute; from soaring inflation and higher interest rates to deteriorating living standards and now the prospect of conflict in Ukraine, which in turn exacerbates the first two. With tensions easing on the border, attention has quickly shifted back to inflation following some more disappointing figures this morning.

Pressure intensifying on the BoE

It seems a long time since we saw an inflation print that wasn’t above the consensus, or central bank estimates, which is fueling further concerns about interest rates and the cost of living crisis. While inflation is expected to peak in April, the road back is becoming ever-more perilous with every above-consensus reading. The peak is now likely to be higher again than many anticipated which probably means more rate hikes and a further squeeze on households and businesses.

Ultimately, the economy will suffer further even if many are better able to absorb higher prices as a result of savings built up over the last couple of years. That may encourage the Bank of England to be cautious in raising rates in the second half of the year as inflation falls but markets are clearly not of that view. Another five hikes are heavily priced in this year, on top of the two consecutive increases in December and February, which would take Bank Rate to 1.75%, the highest since the start of 2009.

Chinese inflation dips, paving the way for further rate cuts

China on the other hand is more focused on supporting the domestic economy, with inflation running well below target and slipping further to 0.9% in January. Producer prices remain high at 9.1% but have been on a downward trajectory in recent months which will allow the central bank to continue to cut rates this year and further shield the economy from the various headwinds it faces including the pandemic and property market turbulence.

Fed minutes to confirm hawkish evolution

I’m not sure what we’ll learn from the Fed minutes later today that we’re not already aware of, with numerous policymakers expressing increasingly hawkish views in recent weeks. Few have been as hawkish as James Bullard who’s called for a full percentage point of increases before July and raised the prospect of inter-meeting hikes. I expect the minutes will reflect the ongoing hawkish evolution at the central bank but it shouldn’t shift the dial as far as markets are concerned, with six hikes already priced in.

Oil edging higher again as NATO questions Russian withdrawals

Oil prices are trending higher again on Wednesday, despite tensions in Ukraine appearing to ease. They spiked late on Friday and at the start of the week as the perceived risk of a Russian invasion increased, threatening to impact supplies in an already extremely tight market.

While crude has pulled back from the highs as Russian troops began leaving the border – NATO remains unconvinced by those assurances – the market remains extremely tight and prices had been on an upward trajectory prior to the escalation. The softening of tensions may have only delayed the march to $100, rather than preventing it. API reported a small drawdown last week which is roughly in line with what’s expected from the EIA report later today.

Gold remains supported as inflation continues to beat expectations

Gold is trading a little higher again today and above $1,850 where it has dipped below over the last 24 hours. This is the first big test of support, with it having been a major barrier of resistance in January. If it can hold above here, we could see it target yesterday’s highs again in the coming days and weeks even as the risk of a Russian invasion declines.

The yellow metal continues to be supported by rapidly rising inflation even as markets price in more and more rate hikes from central banks. Another above-consensus reading from the UK this morning shows the trend is not improving as we near the peak over the next couple of months. Gold could remain well supported for a while yet.

A major breakout coming for bitcoin?

Bitcoin continues to look very healthy after weathering the geopolitical storm well before benefiting from the improvement in risk appetite on Tuesday. Once again it finds itself trading a little shy of $45,500 where it ran into resistance last week after repeatedly seeing support there back in December. A move above here will be a big psychological boost and could propel bitcoin higher. Of course, risk appetite remains important, especially that linked to inflation and interest rates, which could continue to be a drag if anxiety remains in the broader markets.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Rally Amidst Russian Export Ban and Rate Hike Concerns



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Oil prices saw an upward trend on Friday as concerns over Russia’s ban on fuel exports potentially tightening global supply.

This development overshadowed apprehensions of further interest rate hikes in the United States that could impact demand.

However, despite this bounce, oil prices were still on course for their first weekly decline in four weeks.

Brent crude oil gained 46 cents, or 0.5% to $93.76 per barrel while the U.S. West Texas Intermediate crude (WTI) oil surged by 65 cents, a 0.7% rise to $90.28 a barrel.

These gains were driven by growing concerns regarding tight global supply as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) continued to implement production cuts.

Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, commented on the volatile nature of the market, stating, “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe.”

He further noted that investors would closely monitor OPEC+ production cuts and the impact of rising interest rates, predicting that WTI would trade within a range of approximately $90 to $95.

Russia’s abrupt ban on gasoline and diesel exports to countries outside a select group of four ex-Soviet states had an immediate effect as it aimed to stabilize the domestic fuel market. This export restriction prompted a nearly 5% increase in heating oil futures on Thursday.

Tina Teng, an analyst at CMC Markets, explained, “Crude oil bounced off a session low after Russia banned diesel exports, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision.”

However, she also warned that mounting concerns about a recession in the Eurozone could continue to exert downward pressure on oil prices.

The U.S. Federal Reserve recently maintained its interest rates but adopted a more hawkish stance, projecting a quarter-percentage-point increase to 5.50%-5.75% by the year-end. This decision heightened fears that higher rates might dampen economic growth and reduce fuel demand.

Also, the stronger U.S. dollar, reaching its highest level since early March, made oil and other commodities more expensive for buyers using alternative currencies.

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Crude Oil

NNPCL’s Crude Commitments Create Hurdles for Dangote’s Oil Operations



The Nigerian National Petroleum Company Limited (NNPCL) has found itself at the center of a growing challenge faced by the Dangote Petroleum Refinery, one of Africa’s largest industrial projects.

As the refinery gears up for full-scale production, it is grappling with unforeseen hurdles caused by the commitments made by NNPCL in the form of crude oil agreements with other entities.

Dangote Petroleum Refinery, a flagship project of the Dangote Group led by billionaire Aliko Dangote, is on the brink of becoming a game-changer in Nigeria’s energy sector. With a promise to significantly reduce the country’s dependence on imported petroleum products, the refinery holds the potential to bolster the nation’s energy self-sufficiency.

However, recent revelations have shed light on the complexity of the oil industry in Nigeria and how contractual commitments can disrupt even the best-laid plans.

According to Devakumar Edwin, the Executive Director of the Dangote Group, in an interview with S&P Global Commodity Insights, the NNPCL, which normally trades crude oil on behalf of Nigeria, has pledged its crude to other entities.

While Edwin did not disclose the specific recipients of NNPCL’s crude commitments, it was previously announced that the company had entered into a $3 billion crude oil-for-loan deal with the African Export-Import Bank. Under this agreement, NNPCL agreed to allocate future oil production to the bank as repayment for the loan.

This unforeseen twist has left Dangote Petroleum Refinery in a predicament, necessitating the temporary importation of crude oil.

Edwin, however, stated that this importation is only a short-term solution, as the refinery expects to receive crude supply from NNPCL starting in November 2023.

The refinery’s ambitious plans include producing up to 370,000 barrels per day of crude, which will be processed into Automotive Gas Oil (diesel) and jet fuel by October 2023. By November 30, 2023, the plant aims to produce Premium Motor Spirit (petrol), providing a much-needed boost to the domestic fuel market.

While the Dangote Group remains committed to its objectives, the delays caused by NNPCL’s prior commitments have raised concerns among oil marketers.

They believe that the prices of diesel and jet fuel, in particular, will only experience a significant reduction once the refinery begins receiving crude oil supplies from Nigeria rather than importing it.

Despite these temporary setbacks, Edwin reaffirmed the refinery’s readiness to receive crude oil, stating, “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”

In essence, the shift in the refinery’s original timeline can be attributed to the prior commitments made by NNPCL, causing a momentary delay.

However, it remains a beacon of hope for Nigeria’s energy sector, promising a reliable supply of environmentally-friendly refined products and a substantial influx of foreign exchange into the country.

Devakumar Edwin also underscored that the revenues generated from the refinery’s operations would be reinvested in further developments, reaffirming Aliko Dangote’s unwavering commitment to Nigeria’s economic growth.

As the nation eagerly awaits the commencement of production at the Dangote Petroleum Refinery, it is clear that the complex web of oil industry contracts and commitments has played an unexpected role in shaping the refinery’s journey towards becoming a transformative force in Nigeria’s energy landscape.

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Crude Oil

Oil Prices Retreat as Markets Await Fed Meeting



Crude oil - Investors King

Oil prices dipped by almost $1 on Wednesday ahead of the U.S. Federal Reserve’s anticipated interest rate decision.

Investors are grappling with uncertainty surrounding peak rates and the potential impact on energy demand.

Despite a substantial drawdown in U.S. oil inventories and sluggish U.S. shale production indicating a possible tight crude supply for the remainder of 2023, prices tumbled.

Brent crude oil, against which Nigerian oil is priced, slid 88 cents, or 0.9%, to $93.46 a barrel following Tuesday’s peak of $95.96, its highest level since November.

U.S. West Texas Intermediate crude oil also fell by 1%, or 97 cents, to $90.23 a barrel after hitting a 10-month high of $93.74 the previous day.

Edward Moya, senior market analyst at OANDA, said, “The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the U.S. economy has a soft or hard landing.”

He emphasized that the oil market remains “very tight” in the short term.

Investors are closely monitoring central bank interest rate decisions this week, including the Federal Reserve’s announcement, to gauge economic growth and fuel demand. While it’s widely expected that the Fed will maintain interest rates, the focus will be on its projected policy path, which remains uncertain.

U.S. crude oil stockpiles declined significantly, with a 5.25 million-barrel drop last week, exceeding the 2.2 million-barrel decline expected by Reuters analysts.

Goldman Sachs analysts raised their 12-month ahead Brent forecast from $93 a barrel to $100 a barrel, citing lower OPEC supply and higher demand. They believe OPEC can maintain a Brent price range of $80-$105 in 2024.

Russia is considering imposing higher export duties on oil products to address fuel shortages, while U.S. shale oil production is set to reach its lowest point since May 2023. On the demand side, India’s crude oil imports declined for the third consecutive month in August due to maintenance and reduced shipments from Russia.

Exxon Mobil Corp has pledged to increase oil production by nearly 40,000 barrels per day in Nigeria, as part of a new investment initiative in the country, according to a presidential spokesperson.

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