2024-02-14 00:35:00
Crude oil trading reminder: geopolitical tensions combined with OPEC’s optimistic view, oil prices hit the 100-day moving average for seven consecutive days
Continued geopolitical tensions in the Middle East and Eastern Europe and optimism from OPEC helped oil prices close higher on Tuesday (February 13), rising for seven consecutive sessions, but gains were limited as the Federal Reserve waited longer to cut interest rates.
WTI March crude oil futures closed up US$0.95/barrel, an increase of more than 1.23%, at US$77.87/barrel. As of press time, it was now trading at US$77.91/barrel, an increase of 1.28%. Since the end of trading on February 2, it has increased by approximately 7.80%. On February 7, it rose above the 50-day moving average (currently at $73.51), on February 8, it rose above the 200-day moving average (currently at $75.50), and following testing on February 9th and 12th, it stood on February 13th. On the 100-day moving average (cutting point $76.78).
(U.S. West Texas Intermediate (WTI) crude oil futures chart)
The settlement price of Brent crude oil futures rose by US$0.77/barrel, or 0.94%, to close at US$82.77/barrel. As of press time, it is currently trading at US$82.73 per barrel, an increase of 0.89%.
[Market News Analysis]
Middle East conflict keeps oil prices high
Oil prices were nearly flat in Monday trading following rising 6% last week.
The United States has rejected Russian President Vladimir Putin’s proposal for a ceasefire in Ukraine, sources said. The rejection “suggests that there is no real endgame to a ceasefire or peace deal until Ukraine gets what it wants,” noted John Kilduff, partner at New York-based Again Capital. “U.S. sanctions are also finally starting to kick in, and we We see many countries giving up on accepting supplies from Russia.”
News that the United States is rejecting a ceasefire amid concerns regarding a further escalation of war in the Middle East continues to raise concerns regarding future supplies.
Gaza truce talks involving the United States, Egypt, Israel and Qatar failed to achieve a breakthrough on Tuesday as calls grew for Israel to block a planned attack on the southern end of the enclave, which is packed with more than a million displaced people.
Yemen’s Iran-aligned Houthis have also continued to launch attacks in the Red Sea, claiming solidarity with the Palestinians and attacking ships with commercial links to the United States, Britain and Israel.
Optimism from OPEC helps oil prices rise above 100-day moving average
OPEC’s monthly report stated that global crude oil demand will remain strong in 2024. OPEC on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecast for both years, saying there was further upside potential.
OPEC kept its forecast for global oil demand growth unchanged but raised its forecast for economic growth due to slowing inflation and expectations that central banks will cut interest rates. OPEC kept its oil demand growth this year at 2.25 million barrels per day and its forecast for 2025 at 1.85 million barrels per day. The organization said continued strong economic activity in China, a recovery in global air travel and expected healthy demand for petrochemical feedstocks will be key to oil demand growth in 2024. However, inflation levels, monetary tightening measures and sovereign debt levels are likely to weigh on the global oil demand outlook this year. OPEC also said crude futures prices were trending higher amid easing speculative selling pressure and supply disruptions in several regions. Stronger-than-expected macroeconomic data and signs of strong physical market fundamentals further boosted oil prices. At the same time, OPEC raised its global economic growth forecast to 2.7% this year and 2.9% next year, due to interest rate cuts starting in the second half of 2024.
Preliminary data from data analytics firm Kpler shows West Africa will receive a record 730,000 barrels per day of gasoline from Europe this month as importers take advantage of relatively low European prices. If fully realized, February imports would be more than 70% higher than January, the highest level since Kpler began tracking exports on the route in early 2017. Europe produces more gasoline than it consumes. Therefore, the region is a major supplier to West Africa. Europe also exports gasoline to the United States, the world’s largest gasoline consumer, but high inventories and lower demand in the United States in January helped push down European gasoline prices. Sparta Commodities analyst Philip Jones-Lux said that until early February, European gasoline was priced particularly cheaply relative to similar products in the United States and Asia. But with the European gasoline market growing strongly so far in February, this flow is expected to slow once more in March.
The oil-producing group and allies including Russia, known as OPEC+, will decide in March whether to extend voluntary production cuts.
ING analysts said in a note: “Our balance sheet suggests that if the group fails to complete some of the production cuts, the market will be in surplus in the second quarter of 2024.
The change in API crude oil inventories in the United States announced on Tuesday for the week to February 9 was 8.52 million barrels, the largest increase since the week of November 17, 2023.
Premiums for WTI front-month 7th and 13th months remained at three-month highs amid signs of tightening supply. Brent crude’s front-month premium is also at a more than two-month high.
Expectations of Fed rate cut hit oil demand
Federal Reserve policymakers are awaiting more evidence of easing price pressures before cutting interest rates following a government report on Tuesday showed consumer inflation remained elevated last month.
If inflation concerns delay a rate cut by the Fed, it might dampen economic growth and hit oil demand.
The dollar rose to a three-month high on Tuesday on news from the Federal Reserve. A stronger dollar reduces demand for dollar-denominated commodities from buyers paying in other currencies. Higher interest rates will lead to demand uncertainty, thereby limiting crude oil price increases. The Fed is not expected to cut interest rates at its March meeting due to concerns regarding inflationary pressures.
[Wednesday’s trading day focuses on financial data and events (Beijing time)]
① 15:00 British January CPI monthly rate
② 15:00 British January retail price index monthly rate
③ 18:00 Eurozone fourth quarter GDP annual rate revision
④ 18:00 Quarterly employment rate in the Eurozone following seasonally adjustment in the fourth quarter
⑤ 18:00 Eurozone industrial output monthly rate in December
⑥ 22:30 Federal Reserve Goolsby participates in the Q&A session
⑦ 23:00 Bank of England Governor Bailey delivers a speech
⑧ 23:30 EIA crude oil inventories in the United States for the week to February 9
⑨ 23:30 EIA Cushing crude oil inventory in the United States for the week to February 9
⑩ 23:30 EIA strategic petroleum reserve inventory in the United States for the week to February 9
11. At 05:00 the next day, Federal Reserve Board Governor Barr delivered a speech
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