Commodities
Crude Oil prices hit lowest levels since May
The plunge in all prices is coming on worries of a swathe of COVID-19 lockdowns across emerged markets with softening fuel demand.
Crude oil traders are under immense pressure as oil prices dropped more than 3% within a few hours ago. Brent crude plunged as much as 5.8% and the West Texas Intermediate lost as much as 6% in early trade – hitting their lowest levels since May.
The plunge in oil prices is coming on worries of a swathe of COVID-19 lockdowns across emerged markets with softening fuel demand – coupled with the bias for more turbulence ahead of the U.S. presidential election scheduled to hold tomorrow.
What we know
- Brent crude prices at the time of writing, traded at $36.78 a barrel – down over 3.1%.
- Also, the U.S based oil contract West Texas Intermediate traded at $34.55 a barrel, printing a drop of more than 3.5%.
- Brent crude plunged as much as 5.8% and the West Texas Intermediate lost as much as 6% in early trade – hitting their lowest levels since May.
- France, United Kingdom, and Germany have imposed new lockdown measures aimed at curbing COVID-19 infection rates, which have accelerated across the Northern hemisphere at unprecedented levels.
What they are saying
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on the current macros giving oil traders serious headaches at the moment amid falling oil prices seen in its recent price action.
“Traders had priced the initial downward adjustments to European road fuel demand.
“I suspect their initial Eurozone 2nd wave forecast was too optimistic after France intensified the lockdown measure, forcing analysts to quickly downgrade their Q4 economic outlooks, which likely intensified the selling pressure.
“OPEC+ manages the supply-side to ensure a March rollover repeat in November remains unlikely.
“Nonetheless, traders appear to be setting up for a re-run of the associated price collapse we saw then, as uncertainty around the end of the month OPEC meeting has the oil complex hedging that it might be too premature for OPEC+ to make adjustments at this stage.”
Bottomline
That said, a build-up to this winter season could turn quietly chaotic for oil markets, as folks will opt to isolate rather than celebrate – possibly sending both mobility and fuel consumption lower.
Commodities
Vaccine, Backwardation and OPEC+: Hope for oil?
There is a renewed hope for oil prices as backwardation in the oil markets and OPEC+ production cuts prop up the markets despite COVID-19 cases.
Oil prices finished higher on Wednesday, with help attached to progress made on vaccines for COVID-19.
There is also renewed hope for oil prices as backwardation in the oil markets and OPEC+ production cuts prop up the markets despite the coronavirus cases that keep rising worldwide.
Brent oil rose to as high as $48.90. Also, West Texas Intermediate rose as high as $46.20 a barrel on the New York Mercantile Exchange.
“Optimism around vaccine developments continues to buoy sentiment, despite the current lockdowns that we are seeing across Europe, and with the numbers of U.S. COVID-19 cases now passing the 12 million mark,” said Warren Patterson, Head of Commodities Strategy at ING.
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This rise in Oil, moved prices to their highest price since March, after AstraZeneca also declared a great update to the advancement of its COVID-19 vaccine.
The drugmaker in a joint effort with the University of Oxford – said its vaccine was 70% powerful at preventing COVID-19 in a preliminary trial of about 20,000 volunteers.
AstraZeneca’s vaccine progress denotes the third sure vaccine from organizations after Moderna inc., Pfizer and BioNTech, are hurrying to put up a reasonable drug for sale to the public.
In any case, possibilities for an immunization are needed ahead of a potential third wave of the COVID-19 virus. The US recorded more COVID-19 cases this week as indicated by the COVID Tracking Project.
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Backwardation
Another reason why prices are rising is because of what traders call Backwardation. Oil prices are historically bullish when backwardation occurs in the markets. It is a situation where traders no longer have an incentive to store oil and sell it later.
Right now, they are selling it because prices could be lower in the future. The demand from Asia also makes the market feel balanced now.
When the current price of oil is higher than prices trading in the futures market, traders sell live barrels and buy oil futures contracts, which leads to a convergence of both prices.
This can occur because of a higher demand for oil than the contract in the futures market. Traders use backwardation to make a profit, by selling short at the current price and buy at the lower futures price.
OPEC+
To bring support to prices, OPEC+ and partners including Russia will expand the span of their production cuts when they meet soon, to balance frail demand over the winter months.
Recall, OPEC+ cut production in April, as oil demand imploded during lockdowns. Though there were talks about returning about 2m barrels a day of production to the market in January 2021, there is a strong possibility that they will postpone the return of these barrels.
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Goldman said it expects OPEC+ to delay its planned 2 million bpd January production ramp-up for three months, citing coordinated measures to curtail output as “the optimal near-term action,” according to their experts.
There was a lot of purchasing demand, which has pushed prices to this level. This was overshadowed, as there is a worry over worldwide demand, as COVID-19 flare-up proceed far and wide. Prices were likewise increased by information demonstrating a bounce back in China, Japan and other Asian buyers.
The gathering, known as OPEC+, has been cutting production by about 7.7 million barrels every day (bpd), with compliance seen at 96% in October, and had wanted to maintain cuts by 2 million bpd from January.
OPEC+ is set to hold a meeting on Tuesday that could prescribe changes to production cuts when all the members meet on Nov. 30 and Dec. 1.
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“There is no denying that the oil market is fully in the hands of OPEC+,” said Bjarne Schieldrop.
The organisation is the only reason why oil prices today are not $20 a barrel. As such, their upcoming meeting on Nov 30-Dec 1 is hugely important.
Nigeria, however, wants to increase production and their quota as the revenue of the country dwindles with foreign currencies getting scarcer.
The more production means Nigeria would be able to make more oil sales. Hopefully, the meeting would give more room for Nigeria to increase its quota.
Commodities
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.
READ: FG says recent petrol price increase linked to Pfizer Covid-19 vaccine success
- 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.
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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.
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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.”
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Bottom line
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.
Commodities
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.
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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;
READ: Investors pump N7 billions into New Gold ETF
“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.
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“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.
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