Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

The Downside For Oil Price Is Limited

Commodities / Crude Oil Sep 11, 2018 - 02:15 PM GMT

By: OilPrice_Com

Commodities

More than two weeks of nearly uninterrupted price gains for crude oil ended this week, with the rally running out of steam. The question is what happens next?

Oil prices posted steep losses just as the bulls were back on the march. WTI briefly topped $70 per barrel in recent days and Brent was flirting with $80. But the rally was kneecapped by a variety of factors, and it could be challenging to break above those key pricing thresholds in the near future.


“[A]lthough the timing of the price slide comes as a surprise – Brent dipped well below $76 for a time [on Thursday] – the slide itself does not, as expectations recently have doubtless been too optimistic,” Commerzbank wrote in a note. In fact, to some, the timing was not all that surprising – WTI faced technical resistance at around $70-$71, and having failed to break above that threshold, was forced back down.

But beyond the technical analysis, oil prices also face some questions on the fundamentals. The emerging market turmoil (some say crisis, or contagion) has not gone away. Currency problems continue to dog a long list of emerging market economies, pushing a few into, or to the brink of, recession.

In fact, the MSCI Emerging Market Index of equities officially fell into bear market territory on Thursday, and there is little sign of light at the end of the tunnel. “My fear of contagion is that right now the sentiment towards the whole emerging-market spectrum is very fragile,” Mario Castro, a Latin America currency strategist at Nomura, said in a Wall Street Journal interview.

Because much of global oil demand growth is concentrated in rapidly-developing economies, currency weakness could have an outsized impact on crude oil demand.

“The worries about demand and a possible spillover from emerging markets are weighing on prices,” Hans van Cleef, senior energy economist at ABN Amro Bank NV, told Bloomberg. “We have tested breaking higher, but that failed, so now we have a temporary setback. I still expect the market to turn higher at some point, probably driven by Iran.”

Meanwhile, the Trump administration is rumored to be on the verge of dramatically ramping up the trade war with China, potentially moving forward on some $200 billion in tariffs. That would surely spark a response from China, and the back-and-forth retaliatory trade attacks could sap global growth. Also, China, specifically, is a major consumer of oil and one of the largest sources of demand growth, so a slowdown there could also go a long way to undercutting oil demand forecasts.

Also, this past week, the EIA reported weekly data that showed an uptick in gasoline inventories, a bearish sign that signals both an end to summer driving season and possibly hints at a slowdown in demand more generally. It’s one data point, however, so it doesn’t indicate a solid trend.

In fact, even as the markets sold off crude oil on the news, fearing a deterioration in the fundamentals, the reaction may have been overblown. “Gasoline demand growth has not been impressive in 2018, but total US oil demand growth has been stronger,” Standard Chartered said in a note. “As for the rest of the weekly data, it was negative but also unremarkable for late August.”

Related: Saudi Oil Income Could Reach $161B This Year

The softness in recent days has taken the wind out of the sails of crude oil, but it does not mean we are on the verge of another downturn. “The news backdrop does not really point to any further price slide: according to the DOE, US crude oil stocks declined by a surprisingly sharp 4.3 million barrels to 401.5 million barrels last week – their lowest level since February 2015. Things also remain interesting with respect to the Iran sanctions – particularly as far as the situation in India is concerned,” Commerzbank said. “We assume that New Delhi will bow to the pressure from Washington – so the supply situation on the oil market will remain tight.”

With two months to go on Iran sanctions, exports are falling fast. U.S. crude inventories are at their lowest point in years, and Saudi Arabia is going to be forced to burn through much of its spare capacity. U.S. shale, while signs of a production slowdown have yet to really materialize in the production data from the EIA, is still running into a rough patch. Just a few days ago, the CEOs of Schlumberger and Halliburton warned that drilling activity the Permian is cooling, which could translate into slower growth.

All of that is to say that while oil prices fell back at the end of this past week, it does not mean that we are in for another slide.

By Nick Cunningham of Oilprice.com

Link to original article: https://oilprice.com/Energy/Crude-Oil/The-Downside-For-Oil-Is-Limited.html

© 2018 Copyright OilPrice.com - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules