Commodities
Crude oil trading strategy: What oil market participants are watching
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.
Investing.com– Gold prices fell slightly in Asian trade on Tuesday but remained close to recent peaks as traders awaited key U.S. inflation data for more cues on the Federal Reserve’s plans to begin cutting interest rates.
The yellow metal benefited from safe haven buying following a severe risk-off move across markets last week, which was triggered by concerns over slowing economic growth.
Spot prices came within spitting distance of a record high on Friday, but then pulled back as the advanced ahead of this week’s inflation reading.
fell 0.1% to $2,502.07 an ounce, while expiring in December fell 0.1% to $2,531.0 an ounce by 00:22 ET (04:22 GMT).
Gold steady with Inflation, Fed meeting in sight
Focus this week is squarely on inflation data, due on Wednesday, for more cues on the U.S. economy.
Any signs of cooling inflation are likely to spur increased bets on lower interest rates in the coming months- a scenario that bodes well for gold.
Wednesday’s inflation reading comes just a week before a , where the central bank is widely expected to cut interest rates by 25 basis points.
Expectations of the September cut were also a key driver of gold’s recent gains, given that the cut is likely to kick off an easing cycle by the Fed.
Lower rates bode well for gold, given that they reduce the opportunity cost of investing in the yellow metal.
Other precious metals fell on Tuesday, having largely lagged gold in recent weeks. fell 0.1% to $945.0 an ounce, while fell 0.2% to $28.590 an ounce.
Copper edges lower, Chinese trade data brings little cheer
Among industrial metals, prices retreated on Tuesday, taking little support from data that showed some economic resilience in top importer China.
China’s unexpectedly grew in August on strength in the country’s . But laggard offset cheer over this trend, given that they signaled sluggish demand in the country.
China’s overall copper imports shrank 12.3% year-on-year in August, although they were still in positive territory for the first eight months of the year.
The soft import data came following a string of weak readings on China’s economy over the past week, which raised concerns over slowing growth in the world’s biggest copper importer.
The data, coupled with a broader risk-off move in global markets, saw copper nursing steep losses over the past week.
Investing.com– Oil prices steadied in Asian trade on Tuesday as traders sought to gauge the impact of Tropical Storm Francine on U.S. oil production, while concerns over sluggish demand remained in play.
Prices were nursing steep losses from the prior week amid renewed concerns that global oil demand will slow, especially following middling economic readings from top importer China. The prospect of oversupply and increased production also weighed.
But oil prices rebounded on Monday as sentiment improved.
expiring in November were flat at $71.86 a barrel, while steadied at $67.90 a barrel by 22:37ET (02:37 GMT).
Tropical storm Francine set to batter Gulf of Mexico
A slew of oil companies were seen stopping production and refining activities in the Gulf of Mexico as Tropical Storm Francine made its way towards the U.S. mid-South.
The storm is expected to potentially strengthen into a hurricane before making landfall, and is expected to lash the upper Texas and Louisiana coasts with heavy rain and gale winds this week.
The storm could potentially cause extended disruptions in the energy-rich Gulf of Mexico, reducing crude supplies in North America and presenting a tighter near-term outlook for oil markets.
This notion offered oil markets some support, helping them recover a measure of bruising losses logged last week.
Oil battered by demand concerns, China woes
Oil prices were nursing steep losses in recent sessions as markets fretted over slowing demand, especially in top crude importer China.
A string of weak economic readings from the country for August drummed up concerns over slowing growth, as did signs that increasing electric vehicle adoption was also denting fuel demand.
Beyond China, caution over U.S. interest rates also weighed on oil markets, especially ahead of key inflation data due later this week.
The inflation reading comes just a week before a Federal Reserve meeting, where the central bank is widely expected to cut interest rates by 25 basis points.
By Ahmad Ghaddar
LONDON (Reuters) -Oil prices gave up the previous day’s gains on Tuesday as a weaker demand outlook offset U.S. supply disruptions from Tropical Storm Francine and global oil oversupply risks that continue to weigh on the market.
futures were down 95 cents, or 1.3%, at $70.89 a barrel by 1214 GMT. U.S. West Texas Intermediate crude lost 96 cents, or 1.4%, to $67.75.
Both benchmarks had risen about 1% on Monday.
The Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report on Tuesday that global oil demand will rise by 2.03 million barrels per day (bpd) in 2024, down from previously projected growth of 2.11 million bpd.
OPEC also cut its 2025 global demand growth estimate to 1.74 million bpd from 1.78 million bpd.
The weakening global demand prospects and expectations of oil oversupply kept the market suppressed.
Chinese data on Monday showed consumer inflation accelerated in August to its fastest in half a year, though domestic demand remained fragile, and producer price deflation worsened.
And while data released on Tuesday showed China’s exports grew at their fastest in nearly 1-1/2 years in August, imports disappointed against a backdrop of depressed domestic demand.
“The message from China is simple but loud and reverberates throughout the globe,” said PVM Oil analyst Tamas Varga, adding that the country is struggling to encourage spending and boost sluggish demand.
Meanwhile, the U.S. Coast Guard ordered the closure of all operations at Brownsville and other small Texas ports on Monday evening as Tropical Storm Francine barrelled across the Gulf of Mexico. Corpus Christi port remained open with restrictions.
The tropical storm is forecast to strengthen significantly and become a hurricane on Tuesday, according to the National Hurricane Center (NHC).
Exxon Mobil (NYSE:) said it shut in output at its Hoover offshore production platform while Shell (LON:) paused drilling operations at two platforms. Chevron (NYSE:) also began shutting in oil and gas output at two of its offshore platforms.
The U.S. Energy Information Administration is due to publish its short-term energy outlook, with forecasts for the global market and oil output.
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