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Maxed Out

Markets stewed in their own juices overnight leaving equities and currencies and precious metals trading in noisy ranges, but ultimately finishing not too far from where they started.



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By Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA

Markets stewed in their own juices overnight leaving equities and currencies and precious metals trading in noisy ranges, but ultimately finishing not too far from where they started. The big mover overnight was oil, which had another impressive rally, this time helped along by a Reuters story where France’s President Macron was overheard telling US President Macron at the G7 meeting, that a call to the UAE had informed him that both they and Saudi Arabia were maxed out on production capacity.

That is probably the last thing the world needs to hear right now, given that Saudi Arabia and the UAE are regarded as the world’s two available swing producers at the moment. The UAE released an official response stating that they were indeed near-maximum capacity, although this was crouched as within the context of its allowable OPEC+ quota. If true, President Biden’s upcoming cap-in-hand trip to Saudi Arabia may have lost one of its raisons d’etre.

The pain doesn’t stop there for energy markets. Along with reduced Russian gas flows to Europe, Libya also announced it may declare a force majeure on over half of its daily production shortly. Ecuador said over the weekend that it may cease production entirely due to domestic cost-of-living protests, something we’re going to see a lot more of frontier/emerging markets this year sadly. By my rough calculations, Ecuador and Libya will add up to around 1.1 million barrels per day. Not a deal-breaker normally, but much more so in these abnormal times. The reality that energy price inflation isn’t going anywhere anytime soon may partially explain the modest retreat by equities in the last 24 hours.

US data was mixed overnight. US Durable Goods surprised to the upside, rising by 0.70% MoM in May, well above the 0.10% rise forecast. Even the numbers ex-defence and transport (read Boeing), exceeded forecasts easily. In contrast, US Pending Home Sales came in worse at -13.60% YoY for May, while the June Dallas Fed Manufacturing Index slumped to -17.70. With US and German yields also rising overnight, the rally in oil prices, and the Durable Goods, in particular, forced the FOMO gnomes of Wall Street to reassess the lower terminal Fed Funds excuse to buy equities.

We could still see the equity bounce continue, though. Markets are in a schizophrenic frame of mind day-to-day, but underlyingly, are still desperately keen to buy this medium-term dip. Additionally, it is the month and quarter-end this week, and that will prompt no small amount of portfolio rebalancing by institutional investors globally. We should expect the back-and-forth chop-fest to continue this week in the equity space, and possibly, the currency space.

In Asia today, the calendar is as empty as I have seen it for a while. Japan’s 2-year JGB auction and Malaysian PPI are unlikely to move the needle. ECB President Lagarde and Chief Economist Lane both speak this afternoon, and we can expect their comments to be dissected for clues on both monetary policy direction and their anti-fragmentation tool to manage bond spreads between members. Fed Chairman Jerome Powell also speaks tomorrow at an ECB event, along with Ms Lagarde, which could up the ante on mid-week volatility.

In the US, most attention is likely to be on Wholesale Inventories and the Case-Shiller House Price Indexes. Markets are becoming nervous that corporate America may end up with lots of inventory they can’t sell, and the nerves around the US housing market are well known. Given the poor Dall Fed Manufacturing Index overnight, the Richmond Fed Manufacturing Index may garner more attention than usual as well, especially if it is week.

Overall, it looks like Asia will settle for a sideways session, with equities content to mirror Wall Streets’ direction, and currencies, precious metals and cryptos staying comatose. A lack of data in Asia today leaves markets vulnerable to headline bombs on the news ticker.

Asian equities ease with Wall Street.

A surprisingly robust US Durable Goods number prompted a few doubts around the lower terminal Fed Funds rate so buy equities strategy overnight. The soft US pending home sales and Dallas Fed manufacturing data may also have sparked recession isn’t good for equity’s thoughts. With sentiment wavering, Wall Street lightened up some recent longs, sending the equity markets to a negative close. The S&P 500 eased 0.30% lower, the Nasdaq fell by 0.83%, and the Dow Jones fell by 0.20%. US futures are holding steady in Asia this morning.

Across Asia itself, markets appear content to follow Wall Street’s lead, as they have done recently, with markets locally moving lower in response, although not markedly so. Japan’s Nikkei 225 is unchanged, with South Korea’s Kospi down just 0.10%. In Mainland China, the Shanghai Composite and CSI 300 are 0.05% lower. In Hong Kong, the Nasdaq-following Hang Seng is down 0.75%, retracing some of yesterday’s rally.

In regional markets, Singapore is 0.20% lower, with Taipei slipping by 0.75%, reacting to an impending 8.40% increase in electricity prices announced yesterday. Kuala Lumpur is 0.10% lower, Jakarta had fallen by 0.60%, Bangkok is 0.15% lower, and Manila has eased just 0.10%.

Australian markets are bucking the trend by rising today. Although most sectors are lower, resources have rallied, perhaps on statements from Shanghai yesterday declaring victory over its latest Covid-19 outbreak. Less restrictive China equals they will buy more resources I suppose, until their next outbreak. The ASX 200 is 0.50% higher, while the All Ordinaries is 0.40% higher.

Europe has a mixed session overnight, modest gains with Scandinavian markets outperforming, Stockholm and Helsinki rising by over 3.0%. I am assuming that is because the leaders of Turkey, Sweden and Finland are meeting to thrash out their differences and open NATO membership for the latter two. With Asia in wait-and-see mode today and oil prices rising sharply overnight, Europe is probably going to start its session on the back foot. Month and quarter-end rebalancing flows will potentially distort the price action in both the US and Europe markets this afternoon and for the next couple of days.

US Dollar mixed.

A rise in US yields overnight boosted the USD/JPY slightly, but elsewhere, the greenback continued its modest retreat versus the G-20 space as currency markets showed very little reaction to the US data. The dollar index eased 0.17% lower to 103.95, where it remains in Asia. The charts do suggest the downward correction still has more to run, with a failure of 103.50 signalling a deeper correction. The dollar index has support at 1.0350 and 102.50, with resistance at 105.00 and 1.0570.

Elsewhere, currency markets are comatose in Asia, with both DM and Asian currencies almost unchanged from their overnight closes.

EUR/USD rose by 0.25% to 1.0580 overnight, where it remains in Asia. It continues showing resilience as the Russian natural gas exports to Europe situation deteriorates, but initial resistance at 1.0600 and 1.0650 remains challenging. Support is at 1.0450 and 1.0400. Sterling was unchanged at 1.2275 overnight once again, unmoved in Asia. GBP/USD has initial resistance at 1.2360 and 1.2400, with support at 1.2200, 1.2160, and then 1.1950.

USD/JPY edged 0.25% higher to 135.45 overnight as US yields moved slightly higher. It has fallen slightly to 135.30 in Asia. USD/JPY has support at 134.25 and 132.00, with resistance at 136.65 and 138.00. The short-term direction remains at the mercy of US yields, although a fall by the US 10-year through 3.0% could provoke an unwinding of USD/JPY longs.

Asian currencies continued to trade sideways overnight, mostly booking some small gains, but overall, remaining near recent lows versus the US Dollar. That suggests that the rise in investor sentiment in equity markets is yet to spill out into the broader EM complex. The Chinese Yuan has had zero reaction once again to another large liquidity injection by the PBOC this morning. Markets are clearly anticipating the PBOC draining all the liquidity via the repo next week after the quarter-end has passed. Reserves data suggests that Asian central banks have been busy selling US Dollars recently to smooth out currency volatility, but it looks like any consistent rally is going to need a big US Dollar move lower.

Oil prices rally on supply concerns.

Oil prices rallied once again overnight, as the Reuters story outlined above over Saudi Arabia and UAE capacity constraints, as well as disruption of supplies from Libya and Ecuador, overrode US recession concerns. Another lesson is that markets ignore crude futures backwardation at their peril when trying to pick a top in oil prices. Brents’s backwardation actually widened during the sell-off early last week.

Brent crude rose by 2.60% to $115.40 overnight, gaining another 0.90% to $116.300 a barrel in Asia today. WTI rose by 2.30% to $110.00 overnight, rallying another 0.80% higher to $110.70 a barrel in Asia. The rhetoric around declaring victory in Shanghai over omicron seems to be prompting Asian traders to continue buying this morning.

Notably, Brent crude tested and held its rising longer-term support line, today at $108.00, in the early part of last week. Nor was its 100-day moving average (DMA) tested either. That is a technical development that should be respected. Brent crude has support at 111.35, its 100-DMA at $109.40, and the six-month support line at $108.00. It is testing resistance here at $116.50, and a daily close above here would clear the way for a retest of $120.00 a barrel.

WTI’s technical picture has improved markedly overnight, regaining its rising 2022 support line, today at $107.50 a barrel and initial support. A close above $111.25 this evening clears the way for a larger rally to $116.00 a barrel.

Gold fades overnight.

Gold attempted to rally overnight as the G-7 announced a ban on Russian gold imports. That was a rubber stamp exercise though, and although gold climbed intraday, it faded ahead of $1840.00 an ounce. It then proceeded to give back all those gains, finishing 0.25% lower at $1823.00 an ounce. Although US yields rose slightly, the US Dollar was generally slightly weaker overnight, making the price action by gold even more disappointing. It appears that the downside is increasingly gold’s path of least resistance.

Gold has resistance at $1840.00, $1860.00, and $1880.00, the latter appearing an insurmountable obstacle for now. Support is at $1805.00 and then $1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, potentially reaching $1700.00 an ounce. On the topside, I would need to see a couple of daily closes above $1900.00 to get excited about a reinvigorated rally.

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.

Crude Oil

Oil Prices Surge as China’s Holiday Demand and Tight US Supply Drive 2% Weekly Gain



Crude oil - Investors King

Oil prices to close the week with about a 2% gain as robust holiday demand from China and constrained U.S. fundamentals overshadowed concerns about potential supply increases from Saudi Arabia.

Brent crude oil, against which Nigerian oil is priced, gained 5 cents to $95.43 per barrel at about 6:00 a.m. Nigerian time on Friday while the U.S. West Texas Intermediate crude (WTI) rose by 16 cents to $91.87 per barrel.

The market’s resilience became evident as it rebounded from a slight 1% dip in the previous session when profit-taking followed a surge in prices to 10-month highs.

China, the world’s largest oil importer, played a pivotal role in driving prices higher. Strong fuel demand coincided with China’s week-long Golden Week holiday, with increased international and domestic travel significantly boosting Chinese oil consumption.

Analysts at ANZ noted that this holiday season’s surge in travel was underpinned by the fact that the average daily flights booked were a fifth higher than during Golden Week in 2019, pre-dating the COVID-19 pandemic.

Also, improving macroeconomic data from China and the steady growth of its factory activity further supported the bullish sentiment.

The U.S. economy’s robust growth and indications of accelerated activity in the current quarter also bolstered expectations of sustained fuel demand.

Also, tight supplies in the U.S., evidenced by dwindling storage levels at Cushing, Oklahoma, provided additional support to oil prices. As rig counts fell, U.S. oil production was expected to slow down, potentially pushing the market into a deficit of more than 2 million barrels per day in the last quarter.

Investors are now eagerly awaiting the upcoming meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+), scheduled for October 4th.

The meeting will be a crucial indicator of whether Saudi Arabia will consider stepping up its supply in response to the nearly 30% surge in oil prices this quarter.

Analysts, however, caution that the market may be entering overbought territory, leading to possible hesitancy among participants and concerns that OPEC+ could ease production cuts earlier than planned if prices continue to rise.

The outcome of next week’s OPEC meeting will undoubtedly hold significant implications for the oil market’s future trajectory.

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Crude Oil

Oil Prices Soar to a Year High as Crude Reserves Plummet

Crude stocks at a pivotal storage hub in Cushing, Oklahoma, hit their lowest levels since July last year, sparking concerns about future supply stability.



Crude oil

Oil prices surged to their highest level in over a year during Asian trading hours, following a significant drop in crude stocks at a key storage hub.

Crude inventories in Cushing, Oklahoma, plummeted to a mere 22 million barrels in the fourth week of September, close to operational minimums, according to data from the U.S. Energy Information Administration (EIA).

This translates to 943,000 barrels compared to the prior week.

The U.S. West Texas Intermediate (WTI) rose to $95.03 per barrel during Asian trading hours, a peak not seen since August 2022 before settling at $94.61 per barrel.

Meanwhile, Brent crude oil, the international benchmark for Nigerian oil, rose by 1.05% to $97.56 per barrel.

Experts have attributed this rapid price escalation to the precarious situation in Cushing, with Bart Melek, Managing Director of TD Securities, stating, “Today’s price action seems to be Cushing driven, as it reaches a 22 million bbl low, the lowest level since July 2022.”

Melek expressed concerns about the challenges of getting crude oil into the market if inventories continue to dip below these critical levels.

Predicting the future trajectory of oil prices, Melek suggested that prices could remain at elevated levels for the remainder of the year, especially if the global oil cartel, OPEC+, continues to enforce supply restrictions.

He noted that the global oil market is facing a “pretty robust deficit” on top of an already significant shortfall for this quarter due to OPEC’s production cuts.

Saudi Arabia, a key player in OPEC+, has extended its voluntary crude oil production cut of 1 million barrels per day until the year’s end, bringing its crude output to nearly 9 million barrels per day.

Russia has also pledged to continue its 300,000 barrels per day export reduction until December.

However, Melek added that, “We do think that prices could keep up near these levels for quite some time. But I don’t think it’s too permanent. And we might have seen the end of this rally.”

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Nigeria’s Struggles in the Energy Sector Highlighted as Ghana Nears Universal Access



Power - Investors King

Nigeria, the most populous nation in Africa, continues to grapple with challenges in its electricity sector, resulting in a significant lag behind its West African neighbor, Ghana, in achieving universal access to electricity.

Ghana, with its population of 34 million, has made remarkable strides in expanding its power sector, attaining an impressive electrification rate of 88.54% with ambitions to reach 100% by 2024.

Ghana’s success story is characterized by its deliberate policy formulation and swift implementation to bolster its power sector, facilitating increased investment and widespread electricity access for its citizens.

Speaking at the Nigeria Energy Conference and Exhibition 2023 in Lagos, Ghana’s Minister of Energy, Andrew Mercer, underscored his country’s commitment to achieving universal access to electricity by the end of 2024.

Mercer stated, “The president of Ghana emphasized the aggressive target of the government to achieve universal access by the end of 2024 from the current rate of 88.54%. This is consistent with the UN Sustainable Development Goal 7 (SDG7), which aims to ensure access to affordable, reliable, and modern energy for all by 2030.”

In Ghana, the total installed energy capacity stands at 5,454 megawatts (MW) with dependable capacity at 4,843 MW, and peak demand reached 3,561 MW in May 2023.

Meanwhile, Nigeria boasts a significantly higher total installed generation capacity of 13,000 MW but only a fraction, between 3,500 and 4,500 MW, is effectively transmitted and distributed to Nigerian homes and businesses.

Tragically, this disparity means that over 80% of Nigerians still lack access to the electricity grid with only around 11.27 million Nigerians recorded as electricity customers as of Q1 2023, according to the National Bureau of Statistics (NBS).

Ghana’s sustained electricity grid stability has resulted from consistent efforts by the government and stakeholders to enhance the nation’s electricity industry, ultimately improving the quality of life for Ghanaians and supporting economic activities.

Both Ghana and Nigeria have increased their reliance on thermal power generation, reducing the share of hydro power generation in favor of thermal sources. However, while Ghana boasts a record of grid stability and minimal outages, Nigeria has struggled with frequent grid collapses.

In September 2023, Nigeria experienced grid collapses on two occasions, disrupting power supply nationwide.

This disparity in grid reliability highlights the challenges faced by Nigeria’s electricity sector. According to data from the Nigerian Electricity Regulatory Commission (NERC), Nigeria recorded a high number of grid collapses in recent years, with 2018, 2019, 2020, and 2021 witnessing 13, 11, 4, and 4 collapses, respectively.

In 2022, there were seven recorded grid collapses, with the most recent occurring on September 25, 2022, when power generation plummeted from over 3,700 MW to as low as 38 MW.

As Nigeria grapples with these electricity challenges, Ghana’s steady progress in its power sector serves as a reminder of the critical importance of comprehensive policies, infrastructure development, and stability in ensuring universal access to electricity for citizens, a goal that remains elusive for millions of Nigerians.

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