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Stock - Investors King

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

Equity markets are back in the green on Friday after a choppy week in which the recovery rally has stalled.

Efforts by Fed policymakers to manage market expectations have cooled the sense of immense relief that has delivered a strong rebound over the last month. The S&P was up more than 15% at one point while the Dow jumped more than 18%. Not bad on the back of what was ultimately one good inflation month.

James Bullard unleashed a flurry of hawkish views on Thursday which didn’t get a warm reception in the markets initially. But then they did rebound and are higher again today so it seems investors are still taking them with a pinch of salt. The Fed is clearly concerned that “dovish pivot” speculation could be undermining its tightening efforts which could explain why it’s being so steadfast in its hawkish message.

There will also be a concern that the labour market and household spending are showing little sign of weakening despite interest rates rising at an extraordinary rate over the past year. I don’t think that will stop the central bank from slowing the pace next month, especially if we see another drop in inflation just before, but it could cause the Fed to persevere for longer which is a concern for investors.

UK retail sales blip no reflection of what lies ahead

No one in the UK will be fooled by the latest retail sales report into thinking all is not as bad as it seems, not after yesterday’s Autumn Statement. The OBR expects living standards to decline by 7.1% over the next two years, the sharpest drop in six decades, as the country battles a cost-of-living crisis, severe fiscal consolidation, higher interest rates, and a recession. Against that backdrop, it’s hard to get remotely excited by an expectation-beating 0.6% jump in sales in October. Needless to say, it is not the start of a promising trend.

BoJ still unlikely to change course

Japanese inflation data may on the face of it give the impression that the Bank of Japan has achieved its inflation goals and can afford to soften its grip on the bond market but the reality is quite different. What is believed to be unsustainable factors like a weak yen, and high imported energy and food prices, are behind the increases, which the BoJ has been very willing to look through and will likely continue to do so. Especially with the pressure of yen devaluation far less intense after the US dollar’s correction over the last month.

Brent below $90 ahead of December OPEC+ gathering

Oil prices are continuing to retreat against the backdrop of increasingly gloomy economic prospects and surging Covid cases in China which risk further restrictions and lockdowns, threatening demand in the world’s second-largest economy. Brent crude has broken back below $90, testing the mid-October lows and, if sustained, the patience of OPEC+.

The group was heavily criticized for its two million barrel per day output cut and yet oil prices are now not far from the September lows that preceded the decision. Could OPEC+ go even further if the outlook continues to deteriorate when it meets again in a couple of weeks?

Gold holding onto gains

Gold is flat on Friday after paring gains over the last couple of days. The yellow metal has recovered strongly over the last month, around 10% from its lows, as risk appetite has improved and interest rate fears abated. It’s not out of the woods yet but its resilience after hitting resistance at $1,780 is encouraging. This is a major obstacle, having been such a substantial level of support from January to July.

Crypto volatility subsides for now

Bitcoin volatility is subsiding which will no doubt come as a relief to the crypto industry as the fallout from the FTX collapse continues. We’re continuing to learn who exactly is exposed to the collapse, to what extent, and what the ripple effects will be. One obvious impact is that of confidence in the space which could take time to repair in already challenging markets. I’m not sure anyone can be confident that the worst of the rout is behind us which means bitcoin is vulnerable to another plunge, with $15,500 being the first test of support and then potentially $14,000 below that.

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

Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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markets energies crude oil

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

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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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Crude Oil - Investors King

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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