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Oil futures lower on concerns over capacity and negative prices

It has been a bloody couple of weeks for the oil markets. A price war between Saudi and Russia, a depression in demand due to the coronavirus and a slow reaction from oil producers in cutting supply, has crushed the price of oil. Add to that a sprinkle of fundamental supply and demand forces hitting the futures market for oil, and you get the unprecedented price of -$37.63 for a barrel of WTI.

Futures were down today to a low of $10.07 and $19.99 for WTI and Brent, respectively. Concerns over negative prices repeating the next month loom for WTI as we edge closer to the expiry date for July, with the spread between WTI and Brent edging higher. But it is not all good news for Brent. With inventories across the world increasing, filling up excess capacity, negative prices for Brent are not out of the question. However, the odds are stacked up against WTI – with futures being physically settled in Cushing, Oklahoma, and storage being primarily onshore. This is in comparison to Brent with futures being settled in cash alongside the mobility being able to be stored on carrier vessels offshore.

Energy Aspects Chief Oil Analyst Amrita Sen told Bloomberg that the supply recovery is likely to lag the rise in demand for oil, giving a glimmer of hope for the battered commodity. Furthermore, Major OPEC countries Saudi Arabia, Kuwait, Algeria, and Nigeria have already started cutting supply ahead of agreed May 1st start date for the historical deal for where OPEC countries would collectively cut around 10% of the supply of oil to combat the effects of the coronavirus on the price of oil. With countries slowly getting out of lockdown, the demand for refined oil products is predicted to creep up in the following months. Nevertheless, significant countries such as the United States are still getting hammered by the effects of the coronavirus, which may stagger that increase in demand for refined oil products across the world.

This uncertainty with supply and demand, alongside capacity concerns and a repeat the negative prices last month, is being reflected in the drop in price today. But the fact that the price is not negative today may be considered as a good sign as it can be interpreted as traders selling their positions now so they do not experience what happened last week with oil, relieving the selling pressure come expiry for the June oil contracts for WTI.

Oil Traders need to be prepared for volatile and violent swings as supply and demand forces clash it out in the next couple of weeks.

BlackBull Markets Awarded Deloitte Fast 50 2019

Award-Winning New Zealand Forex Broker Two-Years Running

For the second consecutive year, BlackBull Group Limited has been listed on the Deloitte Fast 50 Index.

This index represents the fastest growing companies in New Zealand and after a stand-out premier season in 2018 [550%+], BlackBull Group Limited continue to establish themselves as one of the fastest growing Companies within the country.

As a leading fin-tech and Financial Services provider in New Zealand, BlackBull Markets has rapidly grown to being one of the region's most reputable broker and with an agile corporate culture, the firm hopes to dominate the Fast 50 Index for years to come.

We sat down with Michael Walker, Managing Director of BlackBull Group Limited and about the 2019 ranking, he said “I am very pleased about the current growth path of the business, it is a testament to the hard work the team has put in. We have recently hired more experienced people, who will be valuable in helping us continue our upward trend and to further establish ourselves as an industry leader. In the past year, we’ve increased our number of active clients by 50% and average trading volumes were also higher by around 30%, with key growth in our core European markets and with our strategic partners.”

BlackBull Markets is an award-winning New Zealand Forex Broker. Founded in 2014 with the goal of becoming the leading online Financial Technology and Foreign Exchange Broker, BlackBull Markets is a true ECN, no Dealing Desk brokerage specialising in Forex, CFDs, Commodities, Fibre Optic Communications and Fintech solutions for traders globally.

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If you would like more information about this article, please call Anish Lal on +64 9 558 5142 or email a.lal@blackbullmarkets.com.

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The Week in Review:

Janet Yellen, Chair of the Federal Reserve, has given her last rate statement where she held rates steady. She is due to be replaced by J. Powell shortly, however, monetary policy is expected to remain on the same path. Despite Yellen being slightly hawkish in her statement, the USD ended slightly lower against commodity currencies.

 

The Indian Finance Minister, Arun Jaitley, has presented their latest budget for the country. The budget focuses on strengthening the rural and agricultural economy within the next fiscal year. They are also expecting to reach almost 7.5% growth by the end of the fiscal year on March 31st. This budget gains increased importance due to elections looming next year.

 

 

Economic Outlook 05/02/18 – 09/02/18                                   All Times GMT+0

Monday 05/02/18

09:00  Markit Economics will be releasing their latest figure for the Markit Services PMI. This purchasing managers index provides an indicator of the economic health of the eurozone as well as providing key indicators for sales and employment. A high reading is likely to be bullish for the EUR.

 

14:45  A Markit Services Purchasing Managers Index will also be released for the U.S, capturing business conditions in that area. A high result is likely to lead to an appreciation of the USD.

 

Tuesday 06/02/18

n/a  Banks in New Zealand will be closed due to Waitangi Day.

 

00:30  Trade statistics including Imports, Exports, and the Trade Balance are set to be published by the Australia Bureau of Statistics. These figures will highlight the demand for Australian goods from other nations and vice versa. A decrease in the deficit of $628M will likely suggest an increase in demand for Australian goods, and therefore an appreciation of the AUD.

 

03:30  The Reserve Bank of Australia will be releasing their latest Interest Rate decision as well as a Rate Statement. They are widely expected to hold rates at 1.5% with inflation remaining low. The tone of their statement is likely to be the best indicator of their outlook towards rate changes in the near future.

 

13:30  The Trade Balance for the U.S will also be released by the Bureau of Economic Analysis. This is the balance between imports and exports and currently stands at a deficit of -$50.5B. A decrease in this deficit is likely to be bullish for the USD.

 

21:45  Stats NZ will be releasing their latest figure for the Unemployment Rate in New Zealand. This figure shows the rate of unemployment among the labour force of the country and is a key indicator of the strength of the labour market; a large part of the economy. A high reading is likely to be bearish for the NZD.

 

Wednesday 07/02/18

08:00  The European Central Bank is set to hold a Non-Monetary Policy meeting. This will discuss the economy, business and the financial health of the eurozone. An optimistic outlook may lead to an appreciation of the EUR.

 

21:00  The Reserve Bank of New Zealand will be releasing their latest Interest Rate Decision. They are widely expected to hold at 1.75% but a hawkish tone may lead to an appreciation of the NZD.

 

Thursday 08/02/18

02:00  Trade figures including Imports, Exports, and the Trade Balance are set to be released by the National Bureau of Statistics of China. These figures will provide an insight into the demand that the world has for Chinese-made goods and the demand that China increasingly has for international goods. An increase in the current trade surplus of $361B is likely to be bullish for the CNY.

 

12:00  The Bank of England will be announcing their latest Interest Rate Decision this week. The bank's interest rate currently stands at 0.5% and is not expected to change at this meeting. Mark Carney, Governor of the BOE, has said that future rate hikes are likely to depend on the progress of Brexit negotiations.

 

13:30  Initial Jobless Claims are set to be released by the U.S Department of Labor. This figure represents the number of people that have filed first-time claims for unemployment insurance and is a key indicator of the strength of the labour market. A larger than anticipated number could lead to a depreciation of the USD.

 

Friday 09/02/18

13:30  Statistics Canada will be releasing their latest figure for the Unemployment Rate in January. This figure represents the percentage of the labour force that is currently unemployed and is a key indicator of the strength of the labour market. A high reading is likely to be bullish for the CAD.

 

18:00  The latest update of the Baker Hughes Rig Count will be released, providing an insight into the supply of oil via active rigs. This has count represents rigs exclusively used for oil.

The Week in Review:

The USD has been up and down this week after conflicting statements came from the United States Secretary of the Treasury, Steven Mnuchin, and President Donald Trump. Mnuchin stated that he wanted a weaker dollar that would suit the U.S’ trade ambitions, while Trump later stated that a strong dollar would be a reflection of a strong economy and that Mnuchin’s comment was taken out of context. This caused the dollar to rebound from 3-year lows.

 

The Bank of Japan has held interest rates steady this week at -0.10%. The BOJ stated that they will be continuing with “quantitative and qualitative monetary easing with yield curve control”, for as long as it is necessary, in order to achieve its 2% inflation target.

 

The ECB has also held interest rates steady and the EUR hit $1.25 against the USD. This is a high not seen since 2015. The ECB does not expect to change rates in 2018.

 

Economic Outlook 29/01/18 – 01/02/18                                   All Times GMT+0

Monday 29/01/18

13:30  The U.S Bureau of Economic Analysis is set to release their latest figure for the Core Personal Consumption Expenditure in December. This is the average amount of money that consumers spend within a month and is a key indicator of inflation. A high reading is likely to be bullish for the USD.

 

21:45  Trade figures, including Imports, Exports and the Trade Balance for December are to be released by Stats NZ. These figures will provide an overview of the demand that New Zealand has for international goods and vice versa. An increase in the current deficit is likely to be bearish for the NZD.

 

23:30  METI will be releasing the latest figure for the Unemployment Rate in December. This figure is a key indicator of the strength of the labour market; a large part of the Japanese economy. An increase over the expected figure is likely to be bearish for the JPY.

 

Tuesday 30/01/18

10:00  The Business Climate Indicator for January is set to be released by the European Commission. This is based on monthly surveys that provide insight into the state of business within the euro area. A high reading is likely to be bullish for the EUR.

 

14:00  Standard & Poor’s is set to release their latest figure for the S&P/Case-Shiller Home Prices Index. This represents the change in the residential real estate market across the U.S and is a strong indicator of the strength of the housing market. A high reading is likely to be bullish for the USD.

 

Wednesday 31/01/18

00:30  The RBA will be releasing their latest figure for the Consumer Price Index in Q4. This is a measure of the change in the price of a ‘basket of goods’ and is a key indicator of inflation and consumer spending. A high reading is likely to be bullish for the AUD.

 

10:00  The Unemployment Rate for December is set to be released by Eurostat. This is a key figure in terms of the labour market in the E.U and a high reading is likely to be bearish for the EUR.

 

19:00  The Federal Reserve will meet this week to provide their latest Interest Rate Decision along with a statement on monetary policy. While rate hikes are expected this year, it may be too early for the Fed to begin hiking rates just yet. The tone of the monetary policy statement is likely to affect markets the most. A hawkish tone will likely be bullish for the USD.

 

Thursday 01/02/18

13:30  The latest Initial Jobless Claims figure is set to be released by the U.S Department of Labor. This figure represents the number of people who have filed for first-time claims of state unemployment insurance and is a strong measure of strength in the labour market. A low figure is likely to be bullish for the USD.

 

15:00  The Institute for Supply Management is set to release their ISM Manufacturing PMI for January. This figure provides an overview of business conditions in the U.S manufacturing sector and is a key indicator of the overall economic condition of the U.S. A high reading is likely to be bullish for the USD.

 

Friday 02/02/18

13:30  The U.S Department of Labor is set to release their latest figure for Nonfarm Payrolls in January. This figure represents all jobs that have been created in non-agricultural business. A high reading is generally bullish for the USD.

 

13:30  Januarys Unemployment Rate is also set to be released by the U.S Department of Labor. This is a key indicator of the strength of the labour market and a decrease of the current 4.1% would likely be bullish for the USD.

 

18:00  The latest update of the Baker Hughes Rig Count will be released, providing an insight into the supply of oil via active rigs. This has count represents rigs exclusively used for oil.

The Week in Review:

The House has passed a last-minute bill to extend government funding until February the 16th and avoid a government shutdown. The bill still needs to pass the Senate in order to completely avoid any shutdown, but this may be harder than expected. Democrats are urging for funding for DACA to be put into the bill before they will support it being passed. The last time the government shutdown was in 2013.

 

Brent crude hit just above $70 on Monday, breaking three-year highs. The price is well supported by increased demand that is driven by healthy economic growth across the globe. Cuts to production are still expected to go ahead and the Russian Energy Minister, Alexander Novak, said “the oil market was not yet balanced.

 

Economic Outlook 22/01/18 – 26/01/18                                   All Times GMT+0

Monday 22/01/18

13:30  The Federal Reserve Bank of Chicago will be releasing their latest figure for the Chicago Fed National Activity Index in December. This is a monthly index that looks at current inflationary pressures and the state of the overall economic activity.

 

13:30  Wholesale Sales show the value of sales made by wholesalers in Canada. Novembers figure for this metric is set to be released by Statistics Canada. This will provide an overview of retail trade and consumer consumption within Canada. A high reading is likely to be bullish for the CAD.

 

Tuesday 23/01/18

n/a  The World Economic Forum kicks off this week in Davos. This is an annual meeting that brings together leaders of business, politics, and industry to discuss their views on a wide range of topics, including economics, climate change, equality, education, and technology.

 

04:00  The Bank of Japan will be releasing their latest Interest Rate Decision along with a Monetary Policy Statement. The rate is expected to stay at -0.10% but the contents of the statement will be crucial in assessing where the BOJ stands on their current monetary policy. A bullish outlook by the BOJ is likely to be bullish for the JPY.

 

23:50  Both Exports and Imports for Japan in December are set to be released by the Ministry of Finance in Japan. These figures will provide an insight into the demand for Japanese goods as well as the demand that Japan has for international goods. A strong demand for Japanese goods may lead to an appreciation of the JPY.

 

Wednesday 24/01/18

09:30  The ILO Unemployment Rate is set to be released by National Statistics. This will display the unemployment rate in the U.K and is a key indicator of the strength of the labour force. A high reading is likely to be bearish for the GBP.

 

21:45  Stats NZ will be releasing their Q4 figures for the Consumer Price Index. This is a measure of a ‘basket of goods’ that represents changes in both consumer prices and inflationary pressures. This widely followed figure is likely to lead to an appreciation of the NZD if it reads higher than expected.

 

Thursday 25/01/18

12:45  The European Central Bank will be announcing their latest Interest Rate Decision. The rate currently stands at 0.10% and is not expected to be changed as of now. A hawkish outlook by the ECB will likely lead to an appreciation of the EUR.

 

13:30  Initial Jobless Claims are set to be released by the U.S Department of Labor. This is a measure of the number of people that are filing first-time claims for state unemployment insurance. This is an indicator of the strength of the labour market; a large part of the economy. A high reading is likely to be bearish for the USD.

 

13:30  Statistics Canada will be releasing their latest figure for Retail Sales in November. This figure represents the total value of goods sold by retailers in Canada for this month. It is a key indicator of consumer trends and can indicate increased economic growth in the long-term. A high reading is likely to be bullish for the CAD.

 

Friday 26/01/18

n/a  Banks in Australia will be closed due to Australia Day.

 

18:00  The latest update of the Baker Hughes Rig Count will be released, providing an insight into the supply of oil via active rigs. This has count represents rigs exclusively used for oil.

The Week in Review:

The EUR gained this week after Mario Draghi, Governor of the European Central Bank, said that they could revisit their communication stance in the near future. This increased expectations that the central bank’s policymakers may be prepared to reduce the monetary stimulus program. The EUR gained 0.73% to reach $1.2032 against the USD.

 

China has recorded a record high for trade surplus with the U.S, with an excess of $275.81 billion. This is an increase over 2015's figure of $260.8 billion in 2015. The trade balance between China and the U.S is a politically charged topic. President Donald Trump has taken a firm stance on trade deals across the globe and maintained that he will be tougher with countries that are using unfair practices.

 

Non-farm payroll figures for December came in at 148,000, below the expected 190,000. The largest gains were seen in the healthcare, construction, and manufacturing sectors, while retail, surprisingly, lost 20,000 jobs, even though the holiday period is usually the busiest time of year for many retailers. Unemployment remains low at 4.1%.

 

 

Economic Outlook 15/01/18 – 19/01/18                                   All Times GMT+0

Monday 15/01/18

n/a  Banks in the U.S will be closed due to Martin Luther King’s Birthday.

 

10:00  Eurostat will be publishing their latest figures for the Trade Balance, both seasonally adjusted and not seasonally adjusted, in November. This figure represents the balance between all imports and exports within the Eurozone. A decrease in the current surplus is likely to lead to a depreciation of the EUR.

 

21:45  Electronic Card Retail Sales for December are set to be released by Stats New Zealand. This measures the total purchases made on credit, debit and store cards in New Zealand. This figure is a reliable indicator of the strength of the retail sector and consumer spending. A high figure is likely to be bullish for the NZD.

 

Tuesday 16/01/18

09:30  National Statistics will be releasing their latest figure for the Consumer Price Index in December. This figure measures changes in the price of a ‘basket of goods’ and is widely considered to be an indicator of both purchasing trends and inflation. A high reading is likely to be bullish for the GBP.

 

17:00  The head of the Swiss National Bank, Thomas J. Jordan, will be making a speech. He is expected to comment on the economy as well as potential future monetary policy directions for the SNB. A hawkish outlook from Jordan will likely be bullish for the CHF.

 

Wednesday 17/01/18

00:30  Investment Lending for Homes, in November, is set to be released by the Australian Bureau of Statistics. This figure represents the number of fixed loans provided for domestic properties. A high reading indicates strength in the Australian housing market and therefore will likely lead to an appreciation of the AUD.

 

10:00  Decembers figure for the Consumer Price Index is set to be released by Eurostat. This figure represents the change in the price of a ‘basket of goods’ and is a key indicator of both inflation and purchasing trends. An increase over the expected figure is likely to be bullish for the EUR.

 

15:00  The Bank of Canada will be releasing their latest Interest Rate Decision. This will be joined with a Rate Statement that will provide insight into the bank's decision making process and their stance on rate changes. This will also be followed by a press conference at 16:15.

 

Thursday 18/01/18

00:30  The Unemployment Rate, Participation Rate, and Fulltime Employment figures for December are set to be released by the Australian Bureau of Statistics. These figures will provide an overview of the labour market in Australia; a large part of the economy. A strengthening in the labour market is likely to lead to an appreciation of the AUD.

 

02:00  The National Bureau of Statistics of China is set to release their latest figure for Gross Domestic Product in Q4. This figure represents the total value of all goods and services that are produced by the economy. A high reading is likely to be bullish for the CNY.

 

13:30  Initial Jobless Claims are set to be published by the U.S Department of Labor. This measurement represents the number of people that have filed for first-time state unemployment insurance. This is used as an indicator of the strength of the labour market. A large reading would likely be bearish for the USD.

 

Friday 19/01/18

n/a  The Bank of England will be releasing a Monetary Policy Statement. This will be officially released by the Monetary Policy Committee and will shed light on the policy measures that the bank is undertaking. This statement can provide clues to future monetary policy changes. If the BOE is hawkish it will likely be bullish for the GBP.

 

18:00  The latest update of the Baker Hughes Rig Count will be released, providing an insight into the supply of oil via active rigs. This has count represents rigs exclusively used for oil.

The Week in Review:

Global markets have continued to surge, with both the Dow and FTSE hitting record highs. The Dow Jones broke the 25,000 mark for the first time and Japanese shares also hit their highest level in 26 years. This is a continuation of the bullish year that stocks had in 2017 with the Dow Jones increasing over 25% and the S&P 500 increasing every month. Primary risks for the 2018 trading year include geopolitical risk and central banks withdrawing their supportive policies too early.

 

Oil prices have fallen today due to the soaring U.S production figures that have started to reverse the 10% rally that persisted from December. Political tensions in Iran, the third largest producer in OPEC, had previously pushed prices higher, and the political protests were helping to keep oil pushing past the $60 mark.

 

Economic Outlook 08/01/18 – 12/01/18                                   All Times GMT+0

Monday 08/01/18

n/a  Banks in Japan will be closed due to Coming-of-Age Day.

 

10:00  The European Commission will be releasing a host of measures including Consumer Confidence, Economic Sentiment Indicator, and Business Climate. These indicators will provide an insight into the sentiment that both businesses and consumers have towards the economy and the business environment. High readings will likely be bullish for the EUR.

 

20:00  Consumer Credit Change for November is set to be released by the Board of Governors of the Federal Reserve. This figure represents the amount of money borrowed by individuals and is seen as an indicator of consumer spending and potential economic growth. A high reading is likely to be bullish for the USD.

 

Tuesday 09/01/18

07:00  SBD will be releasing their latest trade figures for November. This includes Imports, Exports, and Trade Balance. These figures will provide an overview of the number of goods demanded by Germany as well as the number of German goods that are demanded by the international market. An increase of the trade surplus will likely be bullish for the EUR.

 

10:00  The Unemployment Rate for November is set to be released by Eurostat. This figure represents the percentage of people who are out of work. This is a strong indicator of the strength of the labour market, a large part of the economy. A low reading is likely to be bullish for the EUR.

 

Wednesday 10/01/18

01:30  The National Bureau of Statistics of China is set to release their December figure for the Consumer Price Index and Producer Price Index. These figures represent the change in value for a ‘basket of goods and services’ and the average price of Chinese industrial goods, respectively. These can be strong indicators of inflation and an increase in these figures is likely to be bullish for the CNY.

 

08:00  The European Central Bank will be holding their latest Non-Monetary Policy meeting. The meeting will cover the state of the economy and business in the Euro Zone as well as looking at financial markets.

 

09:30  Industrial Production for November is set to be released by National Statistics. This measures the total output of all factories and mines in the U.K and is closely followed as an indicator of the strength of the manufacturing sector. A high reading is likely to be bullish for the GBP.

 

Thursday 11/01/18

00:30  Retail Sales for November is set to be released by the Australian Bureau of Statistics. This is a measure of the value of goods sold by retail stores and is a key indicator of consumer spending; a large part of the economy. A high reading is likely to be bullish for the AUD.

 

12:30  The ECB will be holding their Monetary Policy Meeting Accounts. These are an overview of financial, monetary and economic developments and are followed by a summary of the discussion. This release aims to inform the public about the ECB’s stance and rationale behind monetary policy changes.

 

13:30  Initial Jobless Claims are set to be released by the U.S Department of Labor. This figure represents the number of people filing for first-time state unemployment insurance. This is a keen indicator of the strength of the labour market. A low figure is likely to be bullish for the USD.

 

Friday 12/01/18

13:30  The U.S Census Bureau is set to release their latest figures for Retail Sales. This figure represents the total receipts of all retail stores and is a strong measure of consumer spending. A low reading is likely to be bearish.

 

13:30  The U.S Bureau of Labor Statistics will be publishing their latest figure for the Consumer Price Index in December. This is a measure of the change in the value of a ‘basket of goods’ and is widely followed as a strong indicator of both consumer spending and inflation. A high reading is likely to be bullish.

 

18:00  The latest update of the Baker Hughes Rig Count will be released, providing an insight into the supply of oil via active rigs. This has count represents rigs exclusively used for oil.