(MENAFN- DailyFX) Crude Oil, US Dollar, OPEC+, WTI, Brent, Saudi Arabia, China, Fed – Talking Points
- Crude Oil Prices Rebound After Earned Interest Comments
- Any US-Iran deal has been overwhelmed by fears of production cuts
- If the global growth outlook remains opaque, where will WTI crude end up?
Crude oil tried lower to start this week after speculation swirled that a US-Iran deal could finally emerge that would add to global supply. This would potentially replace lost Russian production.
The black gold then relied on two interviews conducted by Bloomberg.
The new head of the Organization of the Petroleum Exporting Countries (OPEC+), Secretary General Haitham Al-Ghais, said the scarcity of spare capacity remained a problem in the oil market.
He also said any additional barrels from Iran would be incremental and market demand was strong enough to absorb any additional production they might add.
An interesting comment was that he did not rule out the possibility of adding the United States to the cartel at some point to form a potential OPEC++.
This sentiment reinforced the remarks of Saudi Energy Minister Prince Abdulaziz bin Salman. He said OPEC+ would be able to cut production if deemed necessary.
He added that the inefficiency of the paper market did not reflect the fundamentals of the physical market.
This is a bit of an unusual comment given that the West Texas Intermediate (WTI) futures contract is deliverable, while the Brent futures contract is deliverable but has a cash settlement option.
Nevertheless, market volatility has increased slightly while the pullback remains benign, returning to levels seen before the Russian invasion of Ukraine.
WTI CRUDE OIL, OFFSET AND VOLATILITY (OVX)
Chart created in TradingView
As the energy crisis is exacerbated by war and bad weather, concerns remain about the global economic outlook.
China, the world’s second-largest economy, continues to stumble over its zero-tolerance Covid-19 policy and real estate sector woes. As a result, they are launching stimulus measures at a time when most other countries are tightening their monetary conditions.
A rescue package for property developers of unfinished projects was announced last Friday to the tune of 29 billion US dollars (200 billion CNY).
On Monday, the People’s Bank of China (PBOC) lowered its rates. The one-year prime rate was cut to 3.65% from 3.7%, while the 5-year prime rate was lowered to 4.30% from 4.45%.
The situation was aggravated by a drought that saw hydroelectricity generation reduced to the point that industrial powerhouse Sichuan Province had to extend power cuts.
The upcoming Jackson Hole symposium, where the Federal Reserve will meet, adds to concerns. The Fed may need to remind markets of its hawkish stance.
These factors could weigh on the outlook for global growth.
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
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