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The Ship Has Sailed

Stock markets staged a surprisingly good recovery following the inflation data on Wednesday but that wasn’t enough to stop them from ending the day in the red, or starting today in a similar position.



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

Stock markets staged a surprisingly good recovery following the inflation data on Wednesday but that wasn’t enough to stop them from ending the day in the red, or starting today in a similar position.

Recession fears have fully gripped the markets and central banks are left with little alternative but to tighten aggressively into it. The CPI data yesterday was the latest in a long list of disappointing releases from the US and the result is that it’s now a coin toss between a 75 and 100 basis points hike in two weeks.

The Bank of Canada made the leap into triple-digit hikes shortly after the US CPI release, acknowledging in the process that it had underestimated inflation since Spring last year. They aren’t alone in that and now central banks are queueing up to hike aggressively in a desperate attempt to get it back under control and limit the shock to the economy.

Investors are clearly now of the view that the ship has sailed on that and the job now is ensuring any recession is shallow and brief. The expectation now is that the Fed will hike aggressively before reversing course in the middle of next year in order to stimulate the economy out of recession. Even that is looking optimistic at this point.

Oil tumbles as IEA revises down demand growth

Oil prices are continuing to trend lower as we move towards the end of the week, with recession fears once again the driving force. The IEA alluded to economic risks in its monthly oil report, in which it downgraded demand growth this year and next by 100,000 barrels per day.

The downward revision would have been larger but for the stronger rebound in developing and emerging economies led by China. I expect those forecasts will be downgraded further as the economic reality begins to bite.

Gold slides again on stronger dollar

Gold is off more than 1% as the dollar continues to drive higher. The yellow metal is feeling the heat from the inflation data and aggressive tightening in response. We could see its popularity improve once we see the peak in the inflation data, which we may now have in the US, but its tendency for upside surprises will leave investors cautious.

Once the peak is in place and we see signs of inflation pressures retreating, we could see gold back in favour as the economy drifts into recession. For now, a break of $1,700 is looking very possible, with $1,680 then key. There may well be more pain to come for gold.

Still hard to make a bullish case for bitcoin

Bitcoin continues to hold on surprisingly well under the circumstances. Widespread risk aversion, higher inflation and interest rates, a stronger dollar and negative crypto headlines – Celsius has filed for bankruptcy – would ordinarily hit the price hard but it’s showing remarkable resilience.

Whether it can continue to swim against the tide, I’m not so sure. What we’re seeing is impressive but I struggle to see the case for bitcoin having bottomed. Time will tell.

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 Continue Slide as Market Skepticism Grows Over OPEC+ Cuts



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Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.

Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.

Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.

Despite this effort to tighten supply, market sentiment remains unresponsive.

“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.

Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.

Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.

Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.

Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.

The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.

Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.

Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.

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Crude Oil

U.S. Crude Production Hits Another Record, Posing Challenges for OPEC




U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.

The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.

The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.

Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.

This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.

While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.

The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.

Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.

Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.

This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.

In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.

However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.

Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.

While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.

The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.

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Crude Oil

Nigeria Takes Bold Step to Energize Oil Sector: Plans to Revoke Dormant Exploration Leases



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The Nigerian Upstream Petroleum and Regulatory Commission (NUPRC) has announced that the Federal Government is considering revoking inactive oil exploration leases granted to companies unable to conduct exploration activities.

Gbenga Komolafe, CEO of NUPRC, conveyed that only companies demonstrating robust technical and financial capabilities would retain their leases under the guidelines of the Petroleum Industry Act (PIA).

“Based on PIA, the commission is focused on delivering value for the nation, so only firms that are technically and financially viable will keep their leases,” affirmed Komolafe in a statement to Reuters.

He outlined that the commission plans to review existing leases, and the allocation of new leases will be contingent upon specific terms and conditions.

Current data from NUPRC reveals that over 60% of prospecting licenses, comprising 53 exploration leases issued since 2003, have expired. Of these, 33 licenses, including four entangled in contract disputes, have not been renewed.

While automatic revocation has not been exercised, the regulator signals a departure from allowing companies to indefinitely retain leases without meaningful exploration activities.

The enactment of the PIA in 2021 empowers the regulator to assess the technical and financial capabilities of companies holding oil exploration leases.

The Nigerian oil and gas sector has faced challenges, witnessing dwindling investments as major players exit onshore and shallow water assets due to security concerns, infrastructure sabotage, and legal disputes in the Niger Delta.

The proposed move aims to incentivize active exploration, addressing the sector’s stagnation and fostering renewed investor confidence.

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