Oil is is trading higher post Algeria OPEC meeting

Brent crude climbed above $80 a barrel after OPEC and its allies signalled less urgency to boost output despite U.S. pressure to temper prices.

Futures in London rose as much as 1.7 per cent. OPEC and its partners gave a tepid response to President Donald Trump’s demand that rapid action be taken to reduce prices, saying they would boost output only if customers wanted more cargoes. Brent could rise to $100 for the first time since 2014 as the market braces for the loss of Iranian supplies due to U.S. sanctions, according to Mercuria Energy Group Ltd. and Trafigura Group.

Oil has rallied since the lows of August as speculation swirls over whether OPEC and its allies will boost output as the sanctions on the Middle East nation’s exports nears. Still, a full-blown trade war between the U.S. and China could imperil global economic growth that underpins crude demand as the two countries begin a new round of tariffs on each other’s goods.

Oil investors are “trading the weekend news very favourably,” said Stephen Innes, Singapore-based head of Asia Pacific trading with Oanda Corp. “Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting while decidedly ignoring U.S. President Trump’s call to increase supplies and ease price pressures.

Bloomberg

Algiers in focus for oil traders

SEOUL (Reuters) – Oil prices were little changed on Friday after falling in the previous session as U.S. President Donald Trump urged OPEC to lower crude prices at its meeting in Algeria this weekend.

OPEC and its allies are scheduled to meet on Sunday in Algeria to discuss how to allocate supply increases to offset a shortage of Iran supplies due to U.S. sanctions.

Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore, said Trump’s remarks just days before the OPEC meeting put “a focus on the likely supply impacts of U.S.-led Iran sanctions.”

“The market had until that point been trading fluidly with the assumption that Saudi Arabia is now comfortable with Brent at $80 or even higher, which is challenging the market’s long-held supposition that prompt Brent between $70 and $80 was OPEC’s sweet spot,” Innes added.

 

Reuters

Aussie moves higher as RBA holds rates at record low

AUD/USD breaks above 0.7400

The RBA held rates steady for the 21st time, a move that had been unanimously expected, keeping them at record lows as it targets sustainable growth and achieving the inflation target over time. The Bank’s growth forecast for the economy remains unchanged, seeing GDP growth averaging slightly more than 3% in 2018 and 2019 while inflation is expected to trend higher in 2019 and 2020. According to the statement, the only concern is the outlook for household consumption, suggesting that household income has only been growing slowly while debt levels are high. From a business perspective, conditions are positive and non-mining investment is increasing.

The immediate market reaction to the announcement was muted, as one might expect given that nothing new was projected, and AUD/USD attempted a quick burst higher but failed to get past the 0.74 level. In later trading the level gave way and the pair ran up to 0.7431, the highest level so far this month. The pair is currently trading at 0.7429 with the 55-day moving average at 0.7452 the next resistance point.

AUD/USD Daily Chart

Source: Oanda fxTrade

Oil prices firmer as Iran sanctions deadline looms

Crude oil prices have edged higher on the day as the Trump Administration confirmed that the first phase of new Iran sanctions will go into effect later today. Also lending support to crude prices, OPEC sources suggested that Saudi Arabia’s supply had unexpectedly fallen in July even after it had committed to increase production to bridge the gap of other members’ production shortfalls.

Prices continue to hold above the 100-day moving average on a closing basis, now at 68.36, which has held since June 19. The weekly EIA crude inventory data are due tomorrow and are expected to show a drawdown of 1.17 million barrels, according to the latest survey of analysts, compared with an increase of 3.8 million barrels last week. The equivalent API data is due later today.

Germany’s trade surplus narrows

Germany’s trade balance in June showed the surplus narrowing from EUR20.3 billion in May to EUR19.3 billion. That’s the smallest surplus in four months and no doubt a step in the right direction as far as Mr. Trump is concerned, but still a long way to go. A rise in imports by 1.2% y/y was the culprit, though industrial production data for the month, which declined 0.9% m/m suggested they were not directly used in manufacturing. EUR/USD is up marginally on the day, now at 1.1570, after touching its lowest point since June 28 yesterday

The Americas calendar is relatively barren, with the Redbook index for July and the IBD/TIPP economic optimism index for August on tap. Canada’s Ivey purchasing managers index for July is also scheduled as the nation returns from a long weekend.

The full MarketPulse economic calendar can be seen here: https://www.marketpulse.com/economic-events/

Market Insight

Commodities Weekly: Gold saved by dollar’s retracement

Overall, the first salvos in the US-China trade war has undermined confidence in the metals space, with traditional safe-haven assets struggling for traction as other havens offer better returns. The energy sector has been driven higher by supply concerns, while the agricultural sector remains broadly under pressure.

Precious metals

Gold had been at the mercy of the US dollar’s firmness during the second half of June, struggling to maintain its label as a safe haven in times of trouble. The precious metal slumped almost 5.5% vs the dollar from its recent peak on June 13 to the near-term low on July 3. The rebound so far has taken the metal to the 38.2% Fibonacci level of the drop and is now consolidating at 1,257.513.

Gold Daily Chart

Source: Oanda fxTrade

Latest data from Chicago’s Commitment of Traders report, with the snapshot taken as of July 3, shows that managed money accounts were net sellers of 1,230 gold contracts from a week prior and short positions exceeding long positions by 1,254 contracts.

Silver has also tracked hold’s progress to some degree during the period. The sell-off in the second half of June saw a bullish divergence pattern unfolding on the stochastics momentum indicator, which suggested a near-term base could be forming. Sure enough, we have seen the rebound unfolding this month and the next resistance point can be found at the 55-DMA, currently at 16.4320.

Silver Daily Chart

Source: Oanda fxTrade

The gold/silver (Mint) ratio seems to have built a near-term base mid-June and has since rallied to test the 55-DMA at 78.4841. It is also oscillating around the 200-DMA at the moment during its consolidation period.

Platinum is staging a modest recovery from its near-5 month downtrend after the metal traded below the 800 mark at the start of the month, the first time since December 2008. The 55-DMA continues to cap to the upside while the July 3 low of 798.365 should hold in the near-term.

Palladium is trading near the middle of its recent 3-month range. It is currently retracing the uptrend started at the beginning of 2016 and has so far managed a correction as deep as 21%. Palladium is currently trading at 954.853.

Base metals

Copper has fallen just over 6% so far this month to touch its lowest level since July last year. The base metal is testing the 100-week moving average, which has held on a closing basis since November 2016. However, investors are keeping an eye on labour negotiations at BHP Billiton’s Escondida mine in Chile, the largest in the world. The current contract expires at the end of this month and any signs that negotiations become protracted and an agreement may not be reached could have implications for copper supply and result in higher prices.

Energy

Natural Gas continues to struggle to gain traction after the hefty slump in February this year. As we are in the midst of the summer months in the northern hemisphere, pressure should remain on gas with near-term support found at the 100-DMA at 2.7914.

Latest data from the US Energy Information Administration (EIA) storage change released last Friday showed an increase of 78 billion cubic feet, higher than the estimate of 75 billion and up from the previous week’s 66 billion. Stocks were 717 billion cubic feet less than this time last year.

Crude oil prices have been edging higher since the OPEC meeting last month amid supply concerns and steady demand. Brent prices received an additional boost following news today that oil workers in Norway are scheduling a strike later today after recent wage talks failed. Coupled with supply issues from Libya after oil port closures, Iran heading toward US sanctions, and ongoing issues with Venezuela, the path oil least resistance for oil prices still appears to be higher. West Texas prices scaled $75 p/barrel last week, while the 100-month moving average is at 74.6907. West Texas CFD is now trading at 74.094 and the Brent/WTI spread is about 4.3 pips.

Brent/WTI Spread Chart

Source: Oanda fxTrade

Agriculturals

Sugar continues to feel the pressure of rising global stockpiles amid surging production in Asia, and slowing demand. Money managers added more than 30,000 contracts to short positions, according to the latest CFTC data as of July 3. As with any crop, the weather could play a significant role and the second half of the year could see concerns about another El Nino weather pattern in Asia emerging. That could be the only hope for bulls. Sugar is now at 0.11165

Corn is attempting to recoup some of June’s heavy losses, and having a tough time of it. This despite a June 29 report from the US Department of Agriculture that showed total acreage for corn and soybeans down 1% from a year ago.

With Soybeans a target for China import tariffs in retaliation for the Trump administration’s actions, soybeans are struggling to bounce strongly off recent 9-1/2 year lows. Friday’s low of 8.334 should provide near-term support while the June 25 high of 8.961 will be the next resistance point.

Wheat broke a three-day rising streak on Monday and has continued the retracement today. Daily momentum has turned bearish, suggesting the fall has a bit further to g

Trade war -will cooler heads prevail ?

Could WTI reach USD 70.00 per barrel ?

By Sara Israfilbayova

From a fundamental perspective, the continuous fall in the U.S. oil inventories is driving market given the positive global growth narrative, Stephen Innes, Head of FX Trading for OANDA told Azernews.

The expert said that oil markets were at the epicentre of volatility with WTI breaking the $ 66.00 per barrel market and marking the highest close since December 2014.

“It’s conceivable we could top $70 on WTI, but of course, Baker Hughes delivering a convincing signal that we should expect more U.S. rigs to come back online the closer we get to $70 per barrel after BH reported that 12 new wells came back online,” Innes stressed.

“But let’s not lose sight of the U.S. dollar follies, which are underpropping oil markets and providing the bounce to all commodity markets,” he stressed.

The expert went on to say that since we may only be in the early stages of the U.S. dollars demise, and when aggregated with the oil markets OPEC induced positive developments, the market could press significantly higher from increasing sensitivity and stronger correlations to the U.S. dollar alone.

“Structurally, the dollar can push much lower as signs are developing that we may be in the early stages of a multi-year secular bear market,” Innes mentioned.

Traders continue to look over their shoulder at the likelihood of U.S. oil production ramps and supporting that argument; Baker Hughes reported the number of active U.S. rigs rose by 12 to 759.

Further, the expert noted that last week was ended by singing a very familiar tune with U.S. equities putting in another strong performance, helped by more positive corporate earnings reports, while the USD weakened further, as the market was still digesting the aftershocks from the verbal ping-pong match when both Mnuchin and Trump dabbled into the FX debate.

“We should expect more two-way uncertainty entering the fray this week which could make for some touch and go moments, but for now, the markets remain comfortable to maintain a longer-term soft USD bias,” Innes added.

Meanwhile, as of January 31, Brent crude futures are down 0.69 cents, or about 1 percent, at $68.33 a barrel, while U.S. West Texas Intermediate (WTI) futures are down, 67 cents, or 1 percent, at $63.83

 

Azernews.