Commodities

Crude oil trading strategy: What oil market participants are watching

Published

2 years ago

August 1, 2022

Crude oil trading strategies require a multi-level approach. Crude oil prices ended July in a second consecutive month of declines due to concerns about rising interest rates and an economic recession globally. Nevertheless, demand for the fuel remains strong enough to support prices above $100 a barrel for Brent. The current trading range of $99-108 a barrel may remain in force this week.

Friday was the last day of September Brent futures trading on the ICE and CME exchanges. Today, the bulk of crude oil trading shifted to the October contract, which traded much lower. As a result, a distinctly bearish candlestick can be seen on Friday’s chart, although it was rising. The discount on American WTI crude oil to Brent has fallen from $10.7 to $5.3 per barrel.

How does oil trading work during geopolitical tension?

The level of geopolitical tension in the world remains elevated. This is bad for smooth international trade, including energy, and can support high commodity prices.

Russian gas deliveries to the EU via Nord Stream remain at 20% of their target. Over the weekend, gas supplies to Latvia were cut off, “due to the buyer’s breach of the conditions of withdrawal.” None of this is directly related to the oil market, but it is an alarming signal to the importing countries that there may be problems with supplies from Russia. It encourages oil trading companies to raise prices.

Over the weekend, U.S. House Speaker Nancy Pelosi, the third person in the U.S. government, flew out on a tour of the Asian region. The intrigue was whether Pelosi would visit Taiwan. Earlier, China had officially demanded that the U.S. cancel the visit and explicitly hinted at the possibility of military escalation in the region if she refused. There was no clear public response, but judging by media reports, no visit to Taiwan is planned. Many people are now building their oil trading strategies on this fact.

The surprise was the increased tension in Kosovo. On Sunday night, explosions and gunshots were heard in northern Kosovo. Serbia’s army, which does not officially recognize Kosovo as a sovereign state, is on high alert. It is still difficult to assess the impact of these events. Serbia is crossed by the Balkan Stream gas pipeline, which connects Hungary with the Turkish Stream.

OPEC+ meeting

The OPEC+ deal comes to an end in August. The total production quota will increase by 640 thousand bpd, completely canceling all the cuts that were imposed back in 2020. This week is the next meeting of the alliance, where representatives of major oil exporting countries will discuss production policy in September 2022. According to rumors in the media, many members want to continue to increase production.

OPEC’s technical committee will meet Tuesday, August 2, where industry experts will present their estimates of supply and demand in the market. The ministerial meeting will be held on Wednesday, August 3. The focus will be on Saudi Arabia’s position. After a visit to the country by U.S. President Joe Biden, chances are that the kingdom will announce plans to use its spare production capacity. If that happens, oil prices could react negatively to the news and go below $100.

U.S. drilling activity – how it affects oil trading basics

At the end of the week, Baker Hughes has traditionally published data on the number of active rigs in the U.S. and Canada. The number of oil rigs in the U.S. rose 6pc to 605pc, while in Canada it rose 13pc to 137pc. The renewed growth in the number of rigs has a positive effect on US production forecasts, although estimates for the second half of 2022 are still very restrained. Earlier in its July review, the EIA specialists revised downwards the forecast for US production. Production in December 2022 is forecasted at 12.5m bpd against the earlier expected 12.6m bpd.

As of this morning, Brent futures are down 0.9% and trading around $103 a barrel.

Commodities

Copper prices dip over 1% following Federal Reserve’s fewer rate cuts signal

Published

9 hours ago

December 19, 2024

Investing.com — Copper prices are down more than 1% after the Federal Reserve hinted at fewer rate cuts for the upcoming year.

The shift to a more hawkish stance by the Fed has resulted in an increase in bond yields, a surge in the strength of the dollar to 25-month highs, and a spike in volatility. This shift has also led to a sharp decline in key commodity currencies.

Market participants have expressed concern that there isn’t much on the annual calendar to halt this downward trend. The three-month London Metal Exchange (LME) contract has registered a 1.5% decrease, trading at $8,912 a ton.

In addition to the Federal Reserve’s stance, looming U.S. tariffs on Chinese goods and uncertainties surrounding China’s domestic demand outlook continue to pressure the market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Commodities

Gold prices rebound from Fed-driven rout, hawkish comments cloud outlook

Published

9 hours ago

December 19, 2024

Investing.com– Gold prices rebounded from a one-month low on Thursday as the Federal Reserve lowered interest rates as expected, although the central bank’s hawkish stance on future rate cuts clouded the outlook for bullion.

Gold prices had dropped more than 2% overnight after the Fed’s policy meeting indicated fewer rate cuts in 2025, as sticky inflation remained a major concern.

jumped as much as 1.3% to $2,618.11, while expiring in February dropped 1.2% to $2,620.79 an ounce by 22:51 ET (03:51 GMT).

Spot gold rebounds, but outlook dim amid slower rate cuts

The Fed reduced by 25 basis points but signaled it will adopt a slower pace for future cuts.

Lower interest rates bode well for gold prices as the opportunity cost of holding gold decreases, making it more attractive compared to interest-bearing assets like bonds.

However, gold futures fell sharply as the rates are expected to remain higher for a longer period after Wednesday’s cut. Markets have ruled out chances of a cut in January and now expect just two more cuts in 2025, against their earlier expectations of four.

Fed Chair Jerome Powell said further reductions depend on progress in curbing persistent inflation, reflecting policymakers’ adjustments to potential economic shifts under the incoming Donald Trump administration.

The Federal Reserve’s hawkish stance was aimed at curbing inflation, but it also signals confidence in the resilience of the U.S. economy. This risk-on sentiment can reduce the demand for safe-haven assets, further dampening bullion’s prospects.

With fewer cuts expected in 2025, the is expected to strengthen further. The greenback surged to an over two-year high on Wednesday.

Additionally, the maintained its interest rates on Thursday, as policymakers remained cautious over Japan’s economic outlook and the path of inflation.

Among other precious metals, rose 0.7% to $928.90 an ounce, while slumped 2.7% to $29.922 an ounce.

Copper falls on as dollar hits 2-yr high

Among industrial metals, copper prices extended declines on Thursday after the Fed’s hawkish stance bolstered the dollar. The red metal took limited support from reports of more fiscal spending in top importer China over the coming year.

The rose 0.1% in Asian trade on Thursday and was at an over two-year high after the Fed meeting.

Benchmark on the London Metal Exchange fell 1.4% to $8,921.50 a ton, while one-month were largely unchanged at $4.089 a pound.

Commodities

Oil slips on demand concerns after Fed signals slower rate cuts

Published

9 hours ago

December 19, 2024

By Colleen Howe, Trixie Yap and Anna Hirtenstein

(Reuters) -Oil prices fell on Thursday after the U.S. Federal Reserve signalled it would slow the pace of interest rate cuts in 2025, which could hurt economic growth, reduce fuel demand and strengthen the dollar.

futures declined by 29 cents to $73.10 a barrel by 1249 GMT. U.S. West Texas Intermediate crude lost 16 cents to $70.42.

The declines gave back Wednesday’s gains on a drop in stocks and the Fed’s expected rate cut of 25 basis points.

Prices weakened after U.S. central bankers issued projections pointing to two quarter-point cuts in 2025 on concern over rising inflation. That was half a point less than they had flagged in September.

“The bottom line for oil is the longer the Fed stays on pause, the stronger the U.S. dollar. This tends to generate headwinds for commodities like oil,” said Harry Tchilinguirian at Onyx Capital Group.

A stronger dollar makes dollar-priced commodities more expensive while higher interest rates weigh on economic growth, potentially reducing demand for oil.

Chinese refining giant Sinopec (OTC:), meanwhile, expects China’s oil consumption to peak by 2027, it said on Thursday.

“The demand-supply balance going into 2025 continues to look unfavourable and predictions of more than 1.0 million bpd demand growth in 2025 look stretched in our opinion. Even if OPEC+ continues to withhold production, the market may still be in surplus,” said Suvro Sarkar, DBS Bank energy sector team leader.

Though demand in the first half of December rose year on year, volumes remained lower than expected by some analysts.

JP Morgan analysts said that global oil demand growth for December so far was 700,000 barrels per day (bpd) less than it had expected, adding that global demand this year has risen by 200,000 bpd less than it had forecast in November 2023.

Official data from the Energy Information Administration on Wednesday showed U.S. crude stocks fell by 934,000 barrels in the week to Dec. 13. Analysts polled by Reuters had expected a drawdown of 1.6 million barrels. [EIA/S]

While the decline was less than expected, the market found support from last week’s rise in U.S. crude exports by 1.8 million bpd to 4.89 million bpd.