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Markets Today – US Inflation, Oil, OPEC, Gold, Bitcoin

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Crude Oil - Investors King

Relief as US Inflation Offers Hope

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

European stock markets are heading for the second day of losses at the start of the week while the US is enjoying a boost following the latest inflation data.

I never thought I’d see markets responding positively to inflation rising 1.2% on the month and 8.5% on the year but these are not normal times. The headline numbers still don’t make for easy reading, especially for households that are continuing to see real incomes fall as a result of higher prices, particularly for energy and food.

But two things stand out from the report that is giving investors hope that inflation is peaking. One is that following months of the headline rate far exceeding expectations, today’s number was roughly in line which has come as a relief. The report has delivered a monthly blow to the markets for a long time now and that may be at an end.

More importantly, core inflation – which strips out volatile food and energy components – was much lower than expected on a monthly basis and a little below on an annual basis at 6.5%. Again, there isn’t much to celebrate about that number but the trend has been a major concern and this report suggests it may be about to improve.

After a period of US yields rising and markets pricing in an increasingly aggressive tightening cycle, the inflation data has come as a relief. Yields have slightly pared gains, the dollar has softened and stock markets have bounced back; particularly the tech sector which has once again been hammered as a result of rapid tightening expectations.

Of course, this is just one report. But it comes at a time when many expected inflation to peak so goes some way to confirming those views. A lot can obviously change and repeatedly has. But oil prices have eased in recent weeks thanks to the SPR release and lockdowns in China, among other things, which could be important.

Oil spikes as OPEC offers the EU little hope

Oil prices are spiking after flirting with sub-$100 levels in recent days as China appeared to loosen lockdown restrictions and OPEC warned that it would be impossible to replace Russian crude while pushing back against calls for it to utilise its spare capacity. This also came as it reported a decline in supply and demand growth this year and another missed month of production targets; something that the market expects after months of the same.

While the EU is continuing to push for higher output which would enable it to consider sanctions on Russian oil without severe economic damage at home – with current prices already causing problems – it seems it’s not going to be aided by the group that remains Russia’s ally in the OPEC+ alliance. With that in mind, the brief flirtation with double-digit oil may already be at an end for now.

Gold jumps as US inflation hits 40-year high

Gold is up around 1% on the day, buoyed by lower yields and a softening of the dollar in the aftermath of the inflation data. It seems that while the data brought some relief, it continues to drive demand for the yellow metal as a hedge against the highest price increases in more than 40 years.

Gold has now broken through the upper end of the range it traded within for much of the last month and could potentially have sights set on $2,000 where it could run into some resistance.

A minor rebound but support looks vulnerable

Bitcoin has had a tough time recently but is paring some of those losses today as it tries to hold above $40,000. A significant move below here would be another blow as it continues to experience substantial downside pressure. A 7% hit on Monday will have come as a bit of a shock but it occurred alongside a broader risk-off move in the markets. Perhaps more concerning is how minor the rebound has been which could cause a wobble in the near term.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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