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Markets Today – Ukraine, Fed Minutes, CBRT, Oil, Gold, Bitcoin




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

Stock markets in Europe are mixed, while US futures are edging lower on Thursday, as uncertainty remains around Russia’s intentions in Ukraine.

It’s been a rather strange week that started with warnings of an imminent invasion – repeatedly denied by Russia – followed by claims of troops withdrawing following the completion of planned drills which has since been rejected by Ukraine and NATO, who have instead insisted that numbers are rising, not falling. It’s no wonder investors don’t know which way to turn.

Clearly, tensions are going to remain until we see a confirmed and substantial reduction of troops at the border but rather than abandon risk as they did late last week and early this, investors seem comfortable sitting on the fence. Of course, that could change if we see any escalation or as we head into the weekend if we have no further clarity.

The West remains convinced that an invasion remains highly likely and that flare-ups in Eastern Ukraine between Russian-backed separatists and Ukrainian forces could be used to justify crossing the border. Whether the intelligence is trustworthy or hysteria, as Russia has labelled it, will soon become clear but in the interim, efforts towards a diplomatic solution continue which will keep investors on edge.

Fed minutes offer little insight into March hike

Inflation remains the key focus for investors as they navigate a tightening environment like no other. The pandemic has delivered widespread price pressures that have lasted longer and far exceeded expectations. Central banks have been forced into action while markets continue to price in more and more hikes this year.

The Fed minutes on Wednesday offered little new information on that front and anything in them that came across as potentially less hawkish is probably out of date by now. The central bank will kick off its tightening cycle next month and a number of consecutive hikes will likely follow. Whether they’ll kick things off with a 50 basis point hike isn’t yet clear and will depend on the data in the coming weeks but there doesn’t appear to be consensus for it yet, despite markets pricing in a fair chance of it happening.

Lira steady as CBRT leaves rates unchanged

The lira continues to trade in a relatively tight range after the CBRT left the repo rate unchanged at 14% for the second consecutive meeting. A series of rate cuts late last year triggered a collapse in the currency and sent inflation soaring – reaching 48.7% in January – as President Erdogan imposed his unconventional beliefs on the supposedly independent central bank. The stability in the currency has come as the central bank has paused its easing cycle while it conducts a comprehensive review of its policy framework. What the outcome of the review will be is anyone’s guess given how the central bank has behaved under the “leadership” of  Governor Şahap Kavcıoğlu.

Oil slides as US and Iran near nuclear deal

There’s no shortage of volatility in the oil market at the moment, with multiple forces combining to create very lively conditions. The market is obviously extremely tight which is why we’re seeing some large moves on a daily basis and the price could already be in triple-figure territory if not for the nuclear talks between the US and Iran.

And it’s this that’s driving the declines today, with reports suggesting an agreement is days away. That would be huge as it could mean around 1.3 million barrels per day of crude quickly re-entering the market and easing some of those supply-side pressures. You can imagine the US has been very motivated to get this deal over the line ahead of the midterms later this year, given how ineffective its last efforts were to bring prices down.

Gold still has plenty of appeal

Gold is continuing to rally amid all the geopolitical uncertainty. Not only do the events on the Ukrainian border have investors seeking out safe-havens, but it also offers inflation protection at a time of surging prices and the prospect of higher oil and gas prices, if Russia does invade.

The latest move has seen gold hit its highest level since mid-June and there still appears to be momentum in the move so we could see $1,900 tested. That’s the next big test for the yellow metal and a big escalation in Ukraine could be the catalyst for such a move.

Bitcoin struggling at key resistance

Bitcoin is almost 2% lower on Thursday, appearing to lose a little momentum on approach to $45,500, a major barrier of resistance. It has shown real resilience in recent weeks but is struggling to generate the momentum needed to take the next step. The uncertainty in the markets probably isn’t helping, although it hasn’t held it back recently. A break above here could be a very bullish development for bitcoin.

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Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024



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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand



Crude oil

Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73



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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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