Oil market news: while prices falling, return to the old days remains impossible

Oil is declining sharply on Monday due to expectations of falling demand for energy resources in China. Thus, June futures on Brent crude on London's ICE Futures exchange is estimated at $101.37 per barrel today, down by 4.49% from the previous session's close. The price of WTI futures for June on NYMEX electronic trading is $97.42 per barrel, which is 4.42% lower than the result of the previous trading. According to last week's results, the price of benchmark Brent crude fell by 4.5% and WTI crude dropped by 4.1%.

China's largest city and financial center, Shanghai, reported a record number of new COVID-19 cases in the past two days - 39 deaths. The total number of deaths among those infected in this city with a population of 25 million people now stands at 87. The first deaths in Shanghai were reported on April 18. A lockdown was imposed in Shanghai on March 28, with most businesses shut down, markets and stores closed and residents locked in their homes and apartments. The population in Shanghai is daily tested for COVID-19 and those who test positive are sent to isolation centers.

Lockdown in Shanghai strongly affects global markets, as huge batches of Chinese components due to idling in factories and plants simply cannot reach production facilities in other countries.

The lockdowns fully affected the demand for gasoline, diesel, and jet fuel, which in China in April is likely to fall by 20% on a yearly basis. According to Bloomberg, the fuel price drop only for the current month has all chances to reach 1.2 million barrels per day. If this forecast comes true, the drop will be the most rapid since the beginning of the COVID-19 pandemic in the Chinese city of Wuhan more than two years ago.

In the light of Russia's rapidly developing military action in Ukraine, the situation in the oil markets is getting much worse. However, the disrupted global supply chain system, skyrocketing inflation, and acute shortages of energy resources were observed in the world even before the Russian special military operation, which has only worsened the prospects and made it impossible to find a quick way out of the current situation.

However, according to some experts, the conflict in Ukraine will end sooner or later, after which the global commodity market will return to its normal pre-crisis state. For example, analyst Michael Lynch reported in Forbes magazine that Russia's military operation will definitely end. The oil market will no longer have reason to worry, and it is sure to return to normal, and fuel prices will fall to quite acceptable levels. Analysts believe that the situation will be normalized by the lifting of sanctions against Russia. The return to the normal operation of the energy market is probably the main condition for Western European countries to maintain their economies and their usual standards of living.

However, the lifting of sanctions is a forced measure for the political elites of the European Union, but not for the United States. US Secretary of State Anthony Blinken, who has repeatedly stressed in his speeches that it did not matter to his country whether Russia ends its military operation or not, the sanctions against it would not be lifted by the United States anyway.

Oil Price reported that the long duration of today's stalemate increases the chance that there would be no return to the old pattern. For example, the fact that Europe is shifting from pipeline gas to liquefied natural gas and that Russian exports are shifting to Asian markets is irreversible. In this regard, the prognosis so far is disappointing for buyers: high oil prices promise to remain so for a long time.

May 13. Oil market shows signs of recovery

The price of oil continues to rise on Friday amid uncertainty about the imposition of a European embargo on oil supplies from Russia. Some EU countries believe that it is necessary to postpone the embargo on Russian imports if Hungary still does not support this ban.

An additional influence on price dynamics is exerted by the situation in China, where the incidence of Covid-19 has declined.

The current Brent oil quote is $108.87 per barrel. The daily high was marked at $109.72. The cost of North American WTI oil is located near $107.30 (the daily maximum is $108.12 per barrel).

Investors also drew attention to the forecast of the International Energy Agency (IEA), according to which the decline in the supply of Russian oil on the world market in the second half of the year may reach 3 million barrels per day. In April, Russia had already reduced production by almost 1 million b/d, which led to a reduction in global supplies by 710 thousand b/d (to 98.1 million b/d).

At the same time, pressure on the oil market is exerted by fears that a rapid tightening of monetary policy by world central banks will provoke an economic downturn and a subsequent decline in demand for energy resources.

May 12. Bitcoin has broken through the level of $26 thousand

The bitcoin exchange rate continues its decline, which began yesterday. The current quote of the most popular cryptocurrency is $27.775.40, the daily minimum was marked at $25.845. The market capitalization of the asset decreased to $515 billion with daily trading volumes of $ 71 billion.

The crypto market began to decline after the publication of inflation data in the United States. According to the US Bureau of Labor Statistics, consumer prices rose by 8.3% in April. This indicator turned out to be 0.2% higher than forecasts (8.1%) and approached the highs for 40 years.

Such statistics somewhat scared investors who hurried to get rid of high-risk assets, including cryptocurrencies. According to experts, both stocks and crypto assets fell in price, which caused panic in the market.

It is worth noting that bitcoin has already fallen below the level of $29 thousand twice in a week. Experts call the $30 thousand level a landmark reference point for bitcoin – until recently, the cryptocurrency rose above $40 thousand, but quickly returned back.

Another event that had an impact on the cryptocurrency market was the news about the Terra project. Unexpectedly, the popular TerraUS stablecoin rapidly collapsed, its exchange price was much less than the declared $ 1. At the same time, it is known that the stablecoin was provided by other digital assets, including bitcoin.

In addition to bitcoin, other cryptocurrencies have also fallen in price. The Ethereum exchange rate today is located at $1909.35 (the daily minimum is $1720.58). The cost of Binance Coin has lost 26%, XRP and Solana have become cheaper by 28% and 35%, respectively. The overall valuation of the cryptocurrency market decreased by 18.5% to $1.2 trillion.

May 17. Unemployment in Britain in the first quarter fell to the lowest since 1974

According to statistics from the National Statistical Office (ONS) of Great Britain, unemployment, calculated according to the methodology of the International Labor Organization (ILO), in January-March 2022 fell to 3.7%, which was the lowest since December 1974.

In the period from December 2021 to February 2022, unemployment was 3.8%. Economists expected the indicator to remain unchanged.

ONS data indicate that the employment rate in the country continued to grow in April. The number of jobs increased by 121 thousand last month and reached 29.5 million, and the number of open vacancies reached a record 1.295 million.

Analysts of the department note that for the first time since the calculations, the number of unemployed turned out to be less than the number of vacancies.

The average salary of Britons in the first quarter of 2022 increased by 4.2% in annual terms. At the same time, adjusted for inflation, salaries decreased by 1.2%.

May 19. Tether lost $7 billion: is it the collapse of stablecoins?

According to CoinGecko, Tether's turnaround offer has dropped from about $83 billion a week ago to less than $76 billion dollars on Tuesday. Investors withdrew more than $7 billion from this stablecoin after it briefly lost its dollar peg.

As you know, Tether is tied to the dollar – it should always cost $1. But last Thursday, its price dropped to 95 cents amid panic over the collapse of a competing token called Terra USD.

Most stablecoins are backed by fiat reserves, which means that they have enough collateral in case users decide to withdraw their funds from them. However, the new generation of «algorithmic» stablecoins (such as Terra USD or UST) have a dollar peg based on a mathematical code.

The loss of the dollar peg drew attention to the problem of reserves behind Tether. When the reserves data were last released, cash accounted for $4.2 billion. Another $34.5 billion consisted of unidentified Treasury bills with a maturity of less than 2 months, and $24.2 billion of assets accounted for commercial securities.

Experts note that the destabilization of tokens has worried regulators in the United States and Europe. Last week, US Treasury Secretary Janet Yellen warned of risks to financial stability if stablecoins continue to grow unchecked. At the same time, she urged lawmakers to adopt laws regulating this sector by the end of 2022.

France is also concerned about the situation in the cryptocurrency market, calling it a «wake-up call» for global regulators. According to the governor of the Bank of France, Francois Villeroy de Gallo, cryptocurrencies can destroy the financial system, especially stablecoins, if they are not regulated. As a result, the European Union plans to subject stablecoins to strict regulatory oversight through new rules known as Crypto Asset Market Regulation or MiCA.

May 26. Brent rises after the release of US data on stocks

On Thursday, the oil market is showing a rise after the release of data from the US Department of Energy on crude oil reserves in the country, which showed a decrease in oil and gasoline reserves before the start of the automotive season.

The current Brent quote is $111.60 (the daily maximum is at $111.86 per barrel). WTI oil is trading at $111.11 per barrel.

According to the report of the Ministry of Energy, commercial oil reserves in the United States for the week ended May 20 decreased by 1.02 million barrels to 419.8 million barrels. Experts on average expected a decrease in reserves by 2.13 million barrels. Stocks at the terminal in Cushing decreased by 1.1 million barrels. Oil production remained at 11.9 million barrels.

Gasoline stocks decreased by 482 thousand barrels, distillates – increased by 1.66 million barrels. Analysts expected a reduction in gasoline stocks by 2.13 million barrels and an increase in distillate stocks by 1 million barrels.

Earlier this week, it was also reported that the administration of US President Joe Biden is considering restricting the export of petroleum products from the country to curb the rise in gasoline and diesel fuel prices.

May 25. Russia and Iran switch to settlements in national currencies

Russia and Iran held a meeting during which the countries agreed to switch to settlements in national currencies and discussed the possibilities of Shetab and Mir payment cards.

The negotiators note that the relevance of the topic of financial and banking relations between countries, as well as the creation of conditions for mutual settlements and payments between legal entities and organizations is a huge step forward.

In addition, the countries discussed swap supplies of oil and gas, as well as increased investments for the implementation of joint oil and gas projects in the republic. According to Russian Deputy Prime Minister Alexander Novak, cooperation between Russia and Iran in the current conditions is becoming one of the most key, including for the transit of goods from the Persian Gulf.

The parties also agreed to accelerate the preparation of an agreement on a free trade zone. Currently, Russia has a free trade agreement with the CIS countries – it was signed on October 18, 2011.

May 30. Inflation in Germany accelerated to a record 8.7% in May

According to data from the German Federal Statistical Office Destatis, consumer prices harmonized with EU standards jumped by 8.7% year-on-year in May. This indicator has become a record since the beginning of his calculations. Analysts had expected a more moderate growth of 8%. Inflation in April was fixed at 7.8%.

On a monthly basis, consumer prices increased by 1.1% in May after an increase of 0.7% in April. Experts expected an increase of 0.5%.

Consumer prices calculated only by German standards jumped by 7.9% y/y and 0.9% m/m in May. Analysts had expected growth of 7.6% and 0.5%, respectively.

According to the Destatis report, annual growth has become a record since the winter of 1973-74.

Energy carriers rose the most: the price increase in May amounted to 38.3% in annual terms after an increase of 35.3% in April. Food prices rose by 11.1% (in April – by 8.6%). The growth of prices for services slowed to 2.9% from 3.2%.

May 31. The oil market continues to grow on the sanctions news

Oil quotes continue to follow the upward trend that began last week. Then Brent was trading below the level of $110, while today the current quotation of the commodity asset reached $123.32 per barrel.

North American WTI crude is trading at $119 per barrel, up from $105 last week.

The driver for growth today was the news that the leaders of the EU countries finally agreed on a partial ban on the import of Russian oil. In particular, the participants of the debate agreed to impose an embargo on two-thirds of oil supplied from Russia. At the same time, by the end of the year, the EU hopes to get rid of 90% of Russian raw materials.

The decision to impose not a full, but a partial embargo was a compromise, since not all countries supported the introduction of an import ban. Hungary, which is heavily dependent on energy resources from the Russian Federation, opposed it.

Analysts note that a complete rejection of Russian oil may lead to its rise in price to $ 185 per barrel.

June 3. Economists predict the collapse of thousands of digital currencies

The cryptocurrency market today has more than 19 thousand cryptocurrencies and dozens of blockchain platforms, however, a number of cryptocurrency firms suggest that in the coming years many digital tokens will collapse, and the number of blockchains will decrease. Experts predict that in the future there will be only dozens of cryptocurrencies.

Universal attention to the vulnerability of cryptocurrencies was attracted by the recent collapse of the so-called algorithmic stablecoin Terra USD and the associated digital token Luna. The fall of Luna shocked the market, after which many economists began to think more and more about the future and viability of digital currencies.

Web3 Foundation CEO Bertrand Perez drew a parallel between cryptocurrencies and «dotcoms». He believes that the collapse of Terra was one of the consequences of too many blockchains and tokens on the market, which confuses users and involves some risks for them.

Just like at the beginning of the Internet era, when too many «dotcom companies» appeared, many of them were fraudulent and did not bring any value. However, over time, the market «cleared» of them, leaving only useful and legitimate companies. Today, the situation in the crypto market is repeating itself, and many experts agree that most of the cryptomonets will no longer exist in the future. The only question is which ones will stay afloat. A number of analysts believe that only bitcoin and Ethereum will survive.

Currently, the market continues to be under pressure. Bitcoin has fallen by more than 50% compared to its all-time high reached in November ($67,789). The current BTC quote is $30,416. Many other digital currencies have also seriously fallen in price compared to historical peaks.

June 2. US stock market closed in the red on fears of tightening monetary policy

The US stock market closed in the red, although at the beginning of yesterday the trading session began with growth.

The value of the Dow Jones Industrial Average fell by 0.54% to 32,813.23 points. The Standard & Poor's 500 dropped 0.75% to 4101.23 points. The Nasdaq Composite index lost 0.72% to 11,994.46 points.

Surprisingly, the negative factor this time was the strong statistics on manufacturing activity in the country, because, according to experts, it increased the likelihood of a more aggressive tightening of the Fed's monetary policy.

In particular, the index of business activity in the US manufacturing sector in May increased to 56.1 points from April's 55.4 points. Analysts on average expected it to decline to 54.5 points. Tomorrow we should pay attention to the statistics on the American labor market. It is expected that unemployment will decrease in May to 3.5% (from 3.6% in April), and the number of jobs will grow by 325 thousand (after an increase of 406 thousand in April).

Analysts note: «There is some irony in the fact that the pressure on the US stock market may increase if the statistical data indicate the continued active growth of the US economy and raise the yield of government bonds to the highs of the current cycle.»

In addition, on June 1, the Fed began reducing the amount of assets on its balance sheet, which reached $ 9 trillion.

June 7. The yen is trading at a 20-year low to dollar on the softer policy of the Central Bank of Japan

According to trading data, the Japanese yen is trading at a twenty-year low against the dollar amid a softer monetary policy of the central bank of Japan.

On Tuesday morning, the yen fell against the US dollar to 132.77. Earlier in the course of trading, the Japanese currency fell even lower against the dollar – to the minimum of April 2002.

Economists note that the weakening of the yen against the dollar is due to the rhetoric of the Central Bank of Japan. The regulator intends to maintain the current soft parameters of monetary policy, while the US Federal Reserve makes more «hawkish» decisions on the discount rate.

On the eve of the deputy head of the central bank Masazumi Wakatabe said that it is necessary to patiently continue easing monetary policy, without excluding the possibility of additional easing.

In addition, yesterday, the head of the Bank of Japan, Haruhiko Kuroda, said that the priority for the regulator is to support the economy and commit to maintaining monetary stimulus. He noted that the economic situation in Japan today does not require tightening of monetary policy at all, since the economy is still in the process of recovering from the effects of the pandemic.

June 9. Oil prices continued to rise after reaching highs the day before

Oil quotes continued to remain stable on Thursday after rising to three-month highs the day before ($124.40). The current price of Brent is $123.41 per barrel.

The market continues to analyze statistical data on the volume of raw materials stocks in the United States and on China's foreign trade for May. The volume of Chinese exports jumped by 16.9% year-on-year last month amid the lifting of many covid restrictions in the country.

Yesterday, the US Department of Energy reported an unexpected increase in oil reserves in the country by 2.02 million barrels to 416.76 million barrels. It is clarified that this is due to an increase in imports to the country to 1.9 million barrels per day (against 0.08 million barrels a week earlier).

At the same time, gasoline reserves decreased by 812 thousand barrels and amounted to 218.18 million barrels. The drop in gasoline stocks was a consequence of the beginning of the automobile season in the United States, when demand for fuel is traditionally high.

Fuel consumption in the country in the reporting week exceeded 20 million barrels per day (and for the same period, these are the highs from the pre-2019 year).

In general, the confirmation of high demand and low inventory levels reinforced investors' confidence in maintaining the deficit and were able to push oil quotes up. Some analysts predict that once fixed above the level of $120 per barrel, oil will be able to go higher – with a target in the area of $130-135 per barrel.

June 16. The Swiss Central Bank raised the rate for the first time in 15 years

Today, the Swiss National Bank (SNB) made an unexpected decision to raise the deposit rate for the first time since September 2007. The rate was raised immediately by 50 basis points, and currently it is minus 0.25% per annum. The previous rate level (minus 0.75% per annum) has been held since 2015.

The regulator noted that the purpose of tightening monetary policy is to prevent the spread of inflation to goods and services in Switzerland. Also, the Central Bank does not exclude the possibility of further rate hikes to stabilize inflation in a range that ensures price stability in the medium term.

After the announcement of the results of the Central Bank meeting, the Swiss franc rate soared against the euro: to 1.0204 euros from 0.9631 euros the day before. Against the US dollar, the franc rose by 1.26% and was trading near 0.982.

June 17. Bitcoin is approaching the $20 thousand mark

Bitcoin continues to demonstrate a persistent «bearish» trend, approaching the main psychological threshold of $20 thousand. The current bitcoin quote paired with the US dollar is $20880.

The pressure on the most popular cryptocurrency continues to be exerted by sales on the world market and the mass withdrawal of investors from risky assets. For example, the Nasdaq index closed more than 4% lower on Thursday, and the S&P 500 fell 3.25%. The Dow Jones index fell below the key threshold of 30,000 points for the first time in more than a year, falling by 2.42%.

The French CAC 40 index ended the day down 2.39%, while the German Dax index fell 3.31%.

Yesterday, European investors were surprised by an unexpected rate hike of 0.50% by the Swiss National Bank. As you know, the central bank of Switzerland is one of the most «dovish» regulators, and the rate was raised for the first time in the last 15 years.

However, despite all the negative factors, analysts also highlight a positive moment in the dynamics of the cryptocurrency – the fact that bitcoin has not yet tested the threshold of $20 thousand. And if the asset manages to return to the $25k area, it could lead to a new upward rally (as at the end of 2020, when BTC rose sharply to a historic high above $60k).

June 22. Inflation in the UK has updated the maximum in more than 40 years

According to the Office for National Statistics of the UK, in May consumer prices jumped by 9.1% compared to the same month last year. As a result, inflation in the country accelerated to the highest in more than 40 years. The current indicator coincided with analysts' forecasts.

In April, the annual inflation rate was recorded at 9%.

On a monthly basis, consumer prices in May rose by 0.7% compared to last month after a jump of 2.5% in April. Experts expected an average increase of 0.6%.

Analysts note that the increase in inflationary pressure in the UK is mainly due to higher prices for food and energy, including electricity, gas and gasoline.

Prices excluding food, alcohol, tobacco and energy (core inflation, CPI Core) in May increased by 5.9% in annual terms and by 0.5% monthly. In April, their growth was 6.2% and 0.7%, respectively.

Retail prices (RPI index) soared by 11.7% year-on-year after rising by 11.1% a month earlier. It is worth noting that it is the RPI index that is used by British employers when negotiating salaries.

June 23. The Asian market fell after Powell acknowledged the risk of a recession

The stock market of the Asia-Pacific region on Thursday morning is mainly reduced. Investors continue to assess the prospects for monetary policy after the head of the US Federal Reserve Jerome Powell acknowledged the risk of a recession.

In particular, the Japanese Nikkei 225 fell to 26.039 points, the South Korean KOSPI fell to 2.314. The Australian ASX 200 fell to 6.425. Hong Kong Hang Seng – to 21.008.

The Chinese Shanghai Composite is growing – up to 3.320.15 points. Shenzhen Component – up to 12.514.73.

Investors’ fears intensified after Jerome Powell said that a recession in the US economy is a very likely outcome. A sharp increase in interest rates can lead to an economic downturn.

At the same time, Powell acknowledged that the rate will continue to rise, but the Open Market Committee (FOMC) is monitoring the incoming data, which implies strict control over the situation, and monetary policy tightening will not be carried out solely on autopilot.