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Crude oil prices close lower due to growing concerns about global economy

Crude oil markets are still trading unusually been less volatile this week

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global oil market, Bonny Light and Brent crude oil, Arthur Eze, Nigeria cuts crude oil production to 1.77mbpd, Nigeria wants international oil companies to pay up now , OPEC+ deal gets a boost as Russia and Saudi Arabia consider further output cut, 4 key reasons why Brent crude might slip back to $35 per barrel, How substantial is compliance for the Oil market?

Crude oil prices closed the last trading day of the week on a bearish note. The prices dropped by more than 1% on Friday as the global economy continues to falter due to renewed COVID-19 restrictions in some vital economic hubs around the world.

Brent crude futures settled at $44.35 a barrel, down 55 cents or 1.2%. Also, America’s West Texas Intermediate futures settled at $42.34 a barrel, falling by 1.1%.

Brent fell about 1% for the week, while WTI saw a weekly rise of nearly 1%.

America’s most recent economic data showed that the country’s initial jobless claims rose higher than earlier projected. The implication is that the path to economic recovery is not as quick as earlier anticipated.
Meanwhile, crude oil markets were relatively calm this week, despite strong macros like Thursday’s FOMC minutes, and the Energy Information Administration (EIA) data released.

It seems like the current market observation concerning the steep decline in volatility in the crude oil price continues to hold. The oil Vix measure of volatility is now back to mid-February levels.

READ: Why Warren Buffett’s company is buying shares of a gold mining company

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Stephen Innes, Chief Global Market Strategist at AxiCorp gave insights on OPEC+ strategy in stabilizing crude oil prices. He said:

The Joint Ministerial Monitoring Committee (JMMC) continued to focus on reigning in laggards, which should be supportive for prices. And although Iraq has made progress but remains above quota, Nigeria is still significantly over-producing. It has been given until August 28th to deliver detailed plans for coming into compliance and over-compensating for their failure to cut production so far.

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“Industry reports estimate that 1.2mb/d of additional cuts through August and September are needed to offset oversupply to date, implying OPEC+ cuts fall to 8.9mb/d in the current phase instead of the 7.7mb/d target.

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“But with enforcement tactics reduced to merely public smearing of laggards or a very unlikely disbanding of the agreement, the proof will need to be in the pudding as it remains critical that non-compliant members toe the line to bring the markets closer to equilibrium.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina or email [email protected] He is a Member of the Chartered Financial Analyst Society.

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Commodities

Oil traders weigh if COVID-19 support programs will buoy economic growth

Brent oil crude futures gained 0.40% to trade at $54.95 while WTI futures were dropped 0.23% to trade at $52.30 a barrel.

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FG battles 6 oil firms for failure to remit N20 trillion , ExxonMobil, Shell, Chevron delay $58.4 billion oil and gas investment in Nigeria, Crude Oil: Nigeria’s oil production slips for the third consecutive month , Tax reform, policy uncertainty to cause oil drop as foreign firms look outside Nigeria, Nigeria plans to support oil price with lower production cost per barrel, Oil price slumps further to $30 pb, as Nigeria grapples with high production cost, Reduction in PMS: A nod to the deregulation of the downstream sector?

Oil prices were mixed at the second trading session of the week. Oil traders are cautiously optimistic that further COVID-19 stimulus programs will buoy economic growth against the increasing COVID-19-induced lockdowns sighted in key international markets.

What you should know

At press time, Brent oil crude futures gained 0.40% to trade at $54.95, while West Texas Intermediate futures dropped by 0.23% to trade at $52.30 a barrel. There was no oil settlement transaction on Monday at the world’s largest economy, due to public holiday.

  • Both global oil benchmarks remained above the $50 mark.
  • In addition, oil traders are treading cautiously on reports that the third-largest crude oil importer, India, recorded poor fuel sales in 2020, as well as rising numbers of COVID-19 cases in Japan and China.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, dropped valuable points as regards macros weighing the black liquid hydrocarbon, taking to account the U.S dollar recorded losses at Tuesday trading session, thereby arbitrarily supporting crude oil prices.

  • “Many COVID-19 jitters out here, but oil prices continue to hold and looks to nudge higher eyeing support from the weaker US dollar as oil sensitive currencies are showing the way. The US data has been less encouraging lately. However, yesterday’s Q4 China GDP data provided a festive reminder that China’s economy continues to fire on all cylinders and brought with it dip-buying support.
  • “Overall, the policy mixes between OPEC+ current supply discipline coalescing with the Biden’s administration’s overarching focus on public health and economic responses to the COVID-19 pandemic, suggest oil prices can go much higher.”

What to expect

Oil traders anticipate that oil prices will stabilize near the current level, as progress is made on the COVID-19 vaccine roll-out. As the black liquid hydrocarbon moves closer on the path to a typical demand environment, oil prices will then soar.

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Commodities

Gold prices stay firm, investors await Janet Yellen’s speech

Gold futures were up 0.38% at $1,836.80/ounce after hitting the lowest point since December 2 yesterday

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Dollar, Gold soars above $1850, rises to 9-year high

Gold prices were firm at the second trading session of the week.

The yellow metal is bouncing from its one-and-a-half-month low seen at the last trading session. Gold bugs are going long on hopes for further stimulus programs to boost economic recovery from COVID-19.

What you should know

At press time, Gold futures were up 0.38% at $1,836.80/ounce after hitting the lowest point since December 2 yesterday.

  • Gold traders await statements from Secretary of the Treasury nominee, Janet Yellen, on U.S. stimulus programs and the U.S dollar during her Senate confirmation scheduled to hold today.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insights to the yellow metal price movement and the odds of breaching above $1,860/ounce.

  • “Gold prices recovered from lows yesterday before trade volumes dropped off, with markets closed in the US, and we ended up with a hammer candlestick.
  • “Spot had fallen significantly earlier but found good support near $1800. If gold can break $1840 convincingly, keep an eye on $1860. The further upside from there might be a struggle if the US dollar continues to climb. Although some market participants may have turned bearish in the short-term, there could be an unexpected rally.”

What to expect

Present price actions in the precious metal market will be choppy this week. Gold traders in the coming days will monitor key geopolitical drivers such as the Treasury Secretary nominee Janet Yellen’s testimony, and US president-elect Biden’s inauguration.

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Commodities

Oil prices tumble on fears of global economic recovery

Brent crude futures dropped about 1%, to $54.65 a barrel, after losing 2.3% on Friday.

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Oil, DPR, FG announces commencement of bids for marginal oilfields despite court injunction

Oil prices dropped at the first trading session of the week.

Oil traders are virtually going short, with the global market’s economic recovery outlook being called into question as COVID-19 infections rise.

What you should know: At press time, Brent crude futures dropped by about 1%, to $54.65 a barrel, after losing 2.3% on Friday. West Texas Intermediate futures lost about 1%, at $51.93 a barrel, having declined 2.3% also on Friday.

READ: Nigeria’s crude oil export earnings rebounded by 116% in November – OPEC

Increasing COVID-19 caseloads throughout the world continued weighing on oil prices, as oil traders doubted how long energy demand would hold up.

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Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave key insights on macros weighing on oil prices

“Oil prices struggled from the mid-week after swelling production inventories then fused with the return of COVID in China, providing a not-so-rosy near-term demand signal. And adding for downside drift to the flow the slow roll-out of vaccines globally is walking back the timeline for jet fuel demand to take off.

The US dollar is strengthening due to the confluence of continental dilemmas. The global “risk-off” tone is also attracting US dollar safe-haven demand. A stronger US dollar seldom if ever makes for good bedfellows with higher oil prices.”

READ: OPEC+ deadlock in production cuts

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What to expect: Still, it remains crucial for OPEC+ to monitor the demand variables around lockdowns and stay responsive to changing conditions. Underlying demand will not approach normal levels until 2022 at the earliest, and vigilance from OPEC+ will continue to be important in supporting oil prices.

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