Crude Oil Is Caught Between Recession Fears and Supply Cuts / Commodities / Crude Oil
Oil prices fluctuated on fears of arecession and a contraction in demand. What are the main figures to observe inthis critical month?
Crude oil prices hovered between red andgreen on Thursday after two days of steep losses this week, still plagued byfears of a global economic recession that could threaten demand but also supplycuts in a tight market.
NewLockdown and Restrictions for the Chinese Panda
On the Asian continent, several millionpeople may again suffer from strict restrictions because of China’s “zero-Covidpolicy” because of this epidemic rebound, which raises fears of the return ofrestrictions in Shanghai a month after the lifting of a long and gruelinglockdown.
JPMorgan Sees a Stratospheric Rise To $380 Per Barrel of Brent
In the most pessimistic scenario imaginedby JP Morgan, Russia could slash its crude oil production by 5 million barrelsper day in retaliation to a price cap being considered by the G7, according to anarticle published by Reuters on Monday.
Inflation+ Recession = Stagflation? Economic Indicators to Be Followed Next…
As we have seen volatility increasing,here are the main concerns that the markets will be facing within the next fewweeks.
Technically, if we take the strictdefinition of recession, the United States has already entered a recessionsince last week, on the 1st of July, since they have just had twoconsecutive quarters of negative gross domestic product (GDP).On the otherhand, I personally believe that central banks’ tools are indeed very limitedgiven the context of supply-driven inflation. On the European side, the cost ofdebt for Southern European countries would become unbearable with higherinterest rates – which could eventually trigger a fragmentation of theEurozone, which is why I can understand that Lagarde is not feeling verycomfortable in her shoes right now.
There are some figures to look at thismonth – as July could be a critical month – so it could shape what the next 6months are going to be like:Watching earnings estimatecosts could give us an indication of the earnings season (15 Jul-31 Aug) for Q2and, therefore, how badly companies are going to be impacted.Important date: 13 of July –1:30 PM London Time / 8:30 AM New York Time – US Consumer Price Index (CPI)data for the month of June to be released. Will it be larger than May figures?No doubt, traders will carefully observe whether the peak of inflation isbehind, or simply not yet… If it is lower, then there will be sense of relief(a rather positive sentiment), the US Fed then wouldn’t have to hike much. Ifnot, then the volatility would increase on negative sentiment, with anotherpeak on the Volatility (or Fear) Index (VIX) causing a drop for markets (inparticular, the stock exchange) much lower, and consequently the Fed would haveto hike further, etc.
Anyway, it is likely that the secondhalf of 2022 will not be bullish, and central banks are not going to come tothe rescue of investors with an easing monetary policy anytime soon.
FundamentalAnalysis
On Wednesday, the American PetroleumInstitute (API) released their weekly oil stock figures.
U.S.API Weekly Crude Oil Stock
The weekly commercial crude oil reservesin the United States rose to +3.825M barrels while the forecasted figure wasjust about -1.100M, according to figures released yesterday by the US AmericanPetroleum Institute (API).
US crude inventories have thus increasedby over 3.825 million barrels, which firmly shows a slowing demand and could beconsidered a strong bearish factor for crude oil prices. This figure could alsosignal a drop in fuel consumption. As a result, demand is now dropping as welldespite the ongoing context of energy supply cuts.
(Source: Investing.com)
WTI Crude Oil (CLQ22) Futures (August contract,daily chart)
RBOB Gasoline (RBQ22) Futures (Augustcontract, daily chart)
Brent Crude Oil (BRNQ22) Futures (Augustcontract, daily chart) – Represented by its Contract for Difference (CFD) UKOIL
That’sall, folks, for today.
Like what you’ve read? Subscribe for our daily newsletter today, andyou'll get 7 days of FREE access to our premium daily Oil Trading Alerts aswell as our other Alerts. Sign up for the free newsletter today!
Thank you.
Sebastien Bischeri
Oil & Gas Trading Strategist
* * * * *
The information above represents analyses and opinions of SebastienBischeri, & Sunshine Profits' associates only. As such, it may prove wrongand be subject to change without notice. At the time of writing, we base ouropinions and analyses on facts and data sourced from respective essays andtheir authors. Although formed on top of careful research and reputablyaccurate sources, Sebastien Bischeri and his associates cannot guarantee thereported data's accuracy and thoroughness. The opinions published above neitherrecommend nor offer any securities transaction. Mr. Bischeri is not a RegisteredSecurities Advisor. By reading Sebastien Bischeri’s reports you fully agreethat he will not be held responsible or liable for any decisions you makeregarding any information provided in these reports. Investing, trading andspeculation in any financial markets may involve high risk of loss. SebastienBischeri, Sunshine Profits' employees, affiliates as well as their familymembers may have a short or long position in any securities, including thosementioned in any of the reports or essays, and may make additional purchasesand/or sales of those securities without notice.
© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.