Crude oil prices dropped at Asia’s trading session on Thursday morning, after rising in the two previous sessions. The slide was attributed to growing concerns on oversupplies after it re-emerged that some oil installations around the Gulf of Mexico are to resume production following Hurricane Sally’s passage.
Also, OPEC is scheduled to hold its meeting today.
What we know: At the time this report was drafted, Brent crude prices dropped 1.30% to trade at $41.76 a barrel, after surging as high as 4.2% on Wednesday.
U.S. West Texas Intermediate fell by 1.57%, to trade at 39.53/barrel, after gaining 4.9% yesterday.
The black liquid derivative price plummeted on the macro coming from a bigger-than-expected rise in U.S. distillate inventories, which include diesel and heating oil, that raised concerns about fuel demand in the world’s largest consumer of oil.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke on why all eyes now seem to be on OPEC’s all-important meeting, scheduled to hold today.
“Still, it will be crucial for the OPEC JMMC to manage the perception that compliance is an issue for the group and to send a strong signal that OPEC+ remains committed to a stricter level of laggard compensation and maintaining cuts for the full duration of the OPEC+ agreement.
“And buttressing a stouter compliance view, the new problem producer UAE has assured the group they will compensate for pumping too much oil for the past few months, which has further boosted sentiment.
“As far as the post JMMC impact, beyond reaffirming compliance and perhaps some resolution on catching up quota volumes, we should expect limited new news and certainly nothing to significantly bump the crude market out of its current funk and push brent back to $45 per barrel.”
However, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meets today, though it is not widely expected to recommend any changes.
Oil prices up, energy demand up
Brent oil futures gained 0.51% to trade at $48.86/barrel and the West Texas Intermediate futures ticked up by 0.46% to trade at $45.92/barrel.
Crude oil prices continued their bullish trend at London’s trading session on Thursday morning. Oil traders are going long, as recent data from the world’s largest economy reveals a surprise draw in U.S. crude oil stockpiles, coupled with high buying interest from Asia, strengthened the resolve of oil traders to go long.
- At about 6.15 GMT, Brent oil futures gained 0.51% to $48.86/barrel.
- West Texas Intermediate futures ticked up by 0.46% to trade at $45.92/barrel.
- Data from the EIA revealed a plunge of 754,000 barrels for the week to November 20.
- However, Gasoline stocks gained 2.2 million barrels in the week to 230.2 million barrels, the Energy Information Administration said.
What they are saying
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave deep insights on key fundamentals pushing oil prices up amid a COVID-19 era.
“Oil traded higher on Wednesday in a very tight range until the rally midday in New York. WTI attempted a clean push through $46, and Brent printed through $49 before retracing some.
The inventory numbers released earlier in the NY session helped push the market higher, with the EIA figures more bullish than the previous days’ API estimates and bullish to consensus.”
He also elaborated on the buying interest seen lately from the Asian economic juggernauts, China and India, which is giving oil bulls enough gas in roaring hard, “Asia’s unquenching demand remains for all to see. Chinese and Indian buying interest continues with tenders issued for both spot and term cargoes, directly responsible for increased demand and reflected in the Brent curve, which has moved to a mild backwardation this week.”
The colossal moves prevailing in the crude oil market over the past two days echo optimism amid positive vaccine development. The flattening of the curve suggests that a positive surprise on current demand is also being reflected.
Gold prices tumble, hit lowest level since July
Gold bulls are presently nursing their wounds amid the sharp drop seen lately in gold prices
Gold bulls are presently nursing their wounds amid the sharp drop seen lately in gold prices. At Tuesday’s trading session, the yellow metal dropped through the $1,800 mark for the first time since July.
What we know: At the time of writing, Gold futures were down 0.16% to trade at $1,801.75/ounce after losing over 35 dollars on Tuesday alone amid a strong appetite for risk among global investors on COVID-19 vaccine turned them away from safe-haven assets.
Adding to the current wave of optimism is the official approval given to the U.S. presidential transition process given by Emily Murphy, director of the General Services Administration.
In an explanatory note to Nairametrics, Stephen Innes Chief Global Market Strategist at Axi spoke on the macros giving gold bears such resolve in taking the price bandwagon down to its lowest level since July;
“The improved expectation for material vaccine deployment in 2021 has likely closed the door on the gold upside. And given the heft of ETF positions, especially the massive accumulation since the beginning of this year, there is definite scope for a deluge of ETF unwinds. So, look for a massive clear out again on a break of the psychological $1800.
“Gold fell and hit its lowest level since July. It is much of the same – transfer of ownership continues into stable allocation – with no huge clips dealing with Asian banks providing the offer during Shanghai Gold Exchange hours.
“Gold rout continues as investors embrace vaccine news. The break of USD1,800/oz support may take prices near USD1,750/oz as surging investor optimism due to promising COVID-19 vaccines has undermined gold and silver.”
What to expect: The precious metal will continue to be under immense pressure from the gold bears taking into account the commanding macro theme related to a vaccine recovery and the reduced risks associated with central bank debt monetization or the pursuit of quasi-modern monetary theory.
Oil prices hit highest level since Q1
Crude oil prices hit their highest price levels since March at the second trading session of the week.
Crude oil prices hit their highest price levels since March at the second trading session of the week. The macros driving crude oil bulls to such gains include reports that COVID-19 vaccine candidate might likely tame the rising COVID caseloads, coupled with U.S. President-elect Joe Biden going ahead to begin his leadership transition.
- At the time of writing this report, Brent crude futures rose higher than 1% to trade at $46.56 a barrel while U.S. West Texas Intermediate crude soared higher than 1%, to $43.59 a barrel.
- Brent crude futures on Tuesday struck its highest price level since early March after the fight between the two oil-producing juggernauts (Saudi Arabia and Russia), which sent oil prices melting like an ice cream exposed in the sun.
- Both major oil benchmarks closed 2% up yesterday after gaining about 5% last week.
Stephen Innes, Chief Global Market Strategist at Axi in an explanatory note to Nairametrics dissected the macros hitting crude oil prices to soar higher;
“Oil benefited from the vaccine news, with WTI trading around $43 a barrel and Brent near $46 even when the US dollar rallied on positive US PMI numbers and taking a bit of steam out of the broader commodity markets.
“While the air looks a bit thin above WTI $43, still, the announcement over the weekend that US COVID-19 vaccinations could begin in early December has spurred another wave of optimism for oil and wider markets, bolstered yesterday by the AstraZeneca version of the vaccine.
“Oil markets are rightly jumping for joy as the AstraZeneca delivery is a big deal as most of the developed world will be able to immunize its most at-risk population to COVID by the spring and likely the entire community by mid-year.”
What to expect: The curve has continued to shift, flattening considerably from 3Q21 into 1Q22, with the time spreads from Dec21 now in backwardation. The shortage is priced into WTI from the end of next year as a capital discipline remains the priority for oil firms.