Oil Supply Concerns
Supply concerns resurfacing causes oil prices higher
After a sharp rise on Monday, crude oil prices experienced a deep recovery on Tuesday and Wednesday, and West Texas Intermediate (WTI) fell by nearly 6% during this period. However, on Thursday (September 19), International oil prices were moderately higher as the market renewed concerns over the impact of Saudi crude oil facilities on supply performance. US WTI crude oil futures prices hit a high of $59.48 per barrel, while Brent crude futures hit a high of $65.56 per barrel.
Saudi crude oil production fell more than half after the attack, which gave oil prices strong support earlier. However, due to the faster-than-expected recovery of Saudi production, the oil price subsequently retreated some of the gains. However, in the daytime, supply pressures still exist and may continue to bring good returns to oil prices.
At the beginning of this week, Saudi Arabia stated that crude oil production would return to normal levels within two to three weeks, which means that it will return to the level of 10 million barrels per day. Despite this, some traders and analysts have expressed doubts about Saudi Arabia’s expectations being too optimistic. The uncertainty of the resumption process is believed to provide some support for oil prices.
On the other hand, Iran’s Supreme Leader Ayatollah Ali Khamenei said that the attack on Saudi Aramco showed the United States’ defense system in Saudi Arabia failed. It pointed out that under the pressure of US sanctions, Iran will not negotiate with the United States.
The US Dollar index weakens for the 7th straight day as investors’ appetite for risk increases. The AUD/USD has broken the 0.69 mark, with the USD weaker against its G10 currencies, with global indices rising on forward optimism on a quicker recovery from the effects of the Coronavirus. US Indices have seemed to quickly discount the effects of the protests as they continue for the 8th straight day.
A couple of weeks ago, I wrote an article about the decorrelation between Wall Street and Main street. Back then, this was related to the Coronavirus’s impact on everyone in the light of Wall Street’s impressive rally. While Main street is still reeling from the devastation the Coronavirus has brought, current protests due to another incident involving a white policeman killing a black man have sparked outrage all over the country.
Will Hong Kong abandon the peg against the USD? The financial hub of Asia, which connects the East to the West has been in the middle of pissing contest between the United States and China, not to mention their domestic struggle between them and China. If protests for autonomy in Hong Kong continue, and President Trump implements drastic foreign policy measures against Hong Kong, extreme capital outflows may ensue, forcing the Hong Kong Monetary Authority to abandon its peg on the U.S. dollar.
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