Oil rises in price due to OPEC + - 24.8.2022
Todays’ Market Summary
- On Tuesday, the US dollar index failed to renew its July maximum and corrected down.
- Yesterday, US stock indices fell for the 3rd day in a row.
- On Tuesday, oil quotes rose for the 3rd day in a row.
- Gold rose yesterday on the back of a correction in the US dollar index.
Top daily news
On Tuesday, the US dollar index failed to renew its July maximum and corrected down. This was supported by weak economic data. According to preliminary estimates, the US S&P Global Services PMI in August fell to its lowest level since May 2020, when there was an epidemic of the coronavirus. However, while strong fluctuations in the foreign exchange market is not observed. Investors are looking forward to Fed Chair Jerome Powell Speech on Friday. Oil rises in price against the background of record prices for natural gas in Europe for the summer period. On Monday they reached $3,000 per thousand cubic meters, and now they have adjusted to $2,700. In addition, OPEC+ may cut oil production if economic sanctions against Iran are lifted as part of the "nuclear deal" with Western countries.
On Tuesday, the US dollar index failed to renew its July maximum and corrected down. This was supported by weak economic data. Indicators of business activity S&P Global United States Purchasing Managers Index (PMI) in August, according to preliminary estimates, unexpectedly decreased. Moreover, S&P Global Services PMI fell to 44.1 points. This is its minimum since May 2020, when there was an epidemic of coronavirus. Another negative was the sharp decline in United States New Home Sales. In July, they reached a minimum since the beginning of 2016 and amounted to only 0.511 million homes. EURUSD yesterday made a sluggish attempt to grow, but failed to gain a foothold above the psychological resistance level of 1. In August, business activity in the Eurozone declined much less than in the US. Moreover, S&P Global Germany Manufacturing PMI even managed to rise. S&P Global/CIPS United Kingdom Manufacturing PMI, on the contrary, turned out to be weak (46) and dropped below 50 for the first time in 2 years. Against this background, the British pound has updated a 2-year low.
Today, Bitcoin continues to trade in a narrow range for the 5th day in a row. The number of various cryptocurrencies traded on crypto-exchanges and crypto-exchangers is now almost 13 000. Theoretically, they can draw liquidity from Bitcoin and interfere with its rise in price. At the same time, it is possible to note the growth of quotes of individual altcoins. For example, Chiliz (CHZ) has risen in price by a third and almost 2 times since the beginning of August. This happened against the backdrop of allowing Socios.com to operate in Italy.
Stock Market news
|Dow Jones Index||-0.47%|
|US Dollar Index||+0.01%|
Yesterday, US stock indices fell for the 3rd day in a row. The main reason for this could be the expectations of investors to further raise the Fed rate (+2.5%) at the meeting on September 21. According to CME FedWatch, the probability of its growth by 0.5% or 0.75% is about the same. A high rate could increase the leverage of US corporations and slow down economic growth. The Jackson Hole Economic Symposium starts tomorrow. Its results may clarify the Fed's position on further tightening of monetary policy. Fed Chair Jerome Powell Speech is expected on Friday (statement by the head of the Fed). Yesterday, Minneapolis Fed President Neel Kashkari spoke, saying that the US regulator is going to continue to hold back inflation. Recall that in July, consumer price growth in the US far exceeded the rate (+2.5%) and reached a 40-year high of +8.5% y/y. In yesterday's trading, a good growth of 3.6% was demonstrated by the sectoral index S&P 500 Energy. This happened against the backdrop of an increase in the price of hydrocarbons. Due to weak sales in the housing market, the S&P 500 Real Estate (-1.5%) was the drop leader. United States Pending Home Sales and Durable Goods Orders are due out today.
Commodity Market news
|Brent Crude Oil||+1.57%|
|Natural Gas Prices||+1.58%|
On Tuesday, oil quotes rose for the 3rd day in a row. Today, US West Texas Intermediate (WTI) is approaching $95 per barrel, which is a resistance level. The main positive was the possibility of OPEC + to reduce production in the event of the lifting of economic sanctions against Iran as part of the "nuclear deal" with Western countries. This opinion was expressed by Abdulaziz bin Salman (Minister of Energy of Saudi Arabia). The next meeting of OPEC + is expected on September 5. Last week, Iran slightly softened its negotiating position. If Western sanctions are lifted, he could increase oil production by 1.5 million bpd. It should be noted that OPEC+ production in July was already 2.89 million barrels per day (bpd) less than previously approved quotas. This was mainly due to Western economic sanctions against Russia. An additional positive for the quotes was the report of the independent American Petroleum Institute on the reduction of oil reserves in the US by 5.63 million barrels per week. This is the maximum weekly drop in stocks since the beginning of March this year. Today, investors, as usual, are waiting for the publication of official data on weekly stocks from the US Energy Information Administration. It should be noted that against the backdrop of a powerful rise in the price of natural gas in Europe, relatively cheap oil may be attractive to European countries for the purpose of winter heating and power generation.
Coffee rose in price yesterday for the 2nd day in a row due to drought in Brazil and other South American countries.
Gold Market News
Gold rose yesterday on the back of a correction in the US dollar index. Precious metals and US currency are alternative assets for investors. Therefore, their quotes, as a rule, move in antiphase (gold rises in price when the dollar weakens and vice versa). The planned rate hike by the Fed is a negative factor for precious metals. Yield US The 10-year Treasury has already exceeded the psychological level of 3% per annum for the 3rd day.