BBI INFO
1. Even though the IEA’s monthly report increased China’s oil consumption, crude oil was stifled by risk fear and lost blood for three days in a row. Brent crude oil dropped below US$72/barrel in early trading, and ultimately ended down 4% at US$74.39/barrel, while WTI crude oil dropped below $66 multiple times throughout the trading day, the biggest single decline in six months, before settling at US$68.21/barrel. This week saw a 10% drop in the price of oil in the US and a 20% drop in Burundi, both hitting new lows not seen in over a year.
2. the Swiss government has promised to bail out Credit Suisse if it runs dry.
To defuse the situation, Credit Suisse sought assistance from the Swiss National Bank. Credit Suisse has been denied any further help from its biggest stockholder, the National Bank of Saudi Arabia. Add more money to the pot. The Swiss National Bank (SNB) stated, “There is no indication of direct contagion risk to Swiss (financial) entities from events in the U.S. banking sector.” The SNB also stated that the Swiss officials would provide cash to Credit Suisse if required. The Federal Reserve is currently reviewing Credit Suisse’s risk alongside the United States Treasury. The American financial behemoth has been cutting its ties with Credit Suisse for a while now. In an effort to limit its counterparty (risk) exposure to Credit Suisse, BNP Paribas ceased receiving credit-linked exchange reports. Credit Suisse credit default swap rates reach levels last seen during the 2008 financial crisis.
3. a hidden Fed employee with a loudspeaker With the collapse of two regional banks in the United States in the past week, Nick Timiraos recently wrote that more investors now anticipate that the Fed’s rate increase cycle may be over due to the wider financial turbulence.
4. Moody’s predicted that the Fed could call an emergency meeting if the stress on the financial sector persisted.
5. The U.S. interest rate futures market experienced an unusual circuit failure. Market participants are betting that the Fed will stop raising interest rates sooner rather than later. On Wednesday, the U.S. interest rate futures market was temporarily halted after a spike in futures values tripped a circuit breaker. The futures contracts for the federal funds rate in August and September, as well as the guaranteed overnight financing rate in June, July, and August, were all impacted by the halt in trading.
6. As of February, the monthly rate of retail sales in the United States was -0.4%, which was lower than the anticipated -0.3% and below the prior figure, which had been changed from 3% to 3.2%. As a result of downward revisions to the prior figure (from 5.7% to 5.5%), the yearly rate of PPI in the United States reported 4.6% in February, below the anticipated 5.40%.
7. Standard & Poor’s downgraded First Republic Bank to a “junk” rating and placed it on its “negative watch list” on 2017-07-07.
8. Rosengren, a former Fed employee, argued that the central bank should halt interest rate increases in order to evaluate threats in both directions.
9. U.S. petroleum oil inventories rose by 1.55 million barrels in the week ending March 10, according to the Energy Information Administration (EIA), which was slightly more than the 1.188 million barrels that had been forecasted. The previous week’s value had fallen by 1.694 million barrels.
10. The G7 is set on maintaining the $60 per barrel limit for Russian petroleum oil, which will disappoint some European nations hoping for stricter Western penalties this month.
11. The Russian Ministry of Defense claimed that the United States started a phone contact between the two countries’ defense ministers. The US State Department’s previous evaluation of the drone mishap in the Black Sea was that it was likely Russia’s accidental action.
12. U.S. senators from both parties are renewing their calls for an investigation into Saudi Arabia’s role in the 9/11 attacks. If the bill were to succeed, the United States government would have 30 days to file a report on Saudi Arabia’s human rights record and the war in Yemen.
13. According to the IEA’s monthly assessment, the oil market will see an excess as Russian oil production rises.
MARKET VIEWPOINTS
Consultant Christopher Yates
Recently, WT crude oil prices have found stability around $70. Now that prices have dropped below this mark, they may drop to $60 per barrel in the near future. There may be long-term support between $60 and $65; if the price drops to that range, it would be a great opportunity to buy more shares for the long haul. The second part of March is typically neutral for oil prices, but prices will turn significantly positive in April-June, the northern hemisphere summer travel season. I think there’s a chance gasoline and energy costs will increase significantly again in the next few years. In the long run, petroleum oil prices could rise again this year, but the near-term prognosis is much gloomier. Investors should be prepared for further declines in oil prices if there is a worsening in economic conditions, as suggested by early signs.
Citigroup’s Director of Global Commodities Research, Ed Morse
Recent oil market performance has been sloppier than anticipated, leaving investors susceptible to a turnaround; however, the current fall has entered an exhausted situation, and we do not foresee an uptick in production or a drop in demand. It’s possible that the reasonable price of petroleum oil is now greater than the present price, whereas a week ago it was lower.
According to Ed Moya, an expert at OANDA,
Traders’ long-term wagers are expected to cluster around this price.
As market volatility increased, so did worries that global economic development was stalling, causing gasoline prices to fall further. After WTI crude oil dropped below $70, dealers in the energy market worried about excessive technical selling. Market fundamentals currently suggest a very gloomy outlook for petroleum oil consumption. Credit Suisse, a major financial institution, has no plans to reduce the potential for a domino effect. Further, both the U.S. and Chinese economies are showing signs of weakness in terms of spending and the prognosis for demand.
While WTI is currently near $60, the crude oil market will be in excess for the better part of the first half of the year unless the Fed makes a significant policy error that causes a severe recession. If oil prices fall back to their October lows next week, it could add to the downward pressure on WTI petroleum towards the $60 mark, depending on how bad the financial situation gets. Despite the dangers, crude oil market undersupply could resume this summer, so some dealers may make long-term wagers around $60-$65 per barrel.
HFI: The Center for Oil Research
If WTI oil prices stay in the $65-70 level, our model predicts that US crude oil output could drop by an unanticipated 200,000 barrels per day. However, the IEA monthly report anticipates that Brazil will boost supply, so the two will cancel each other out. As for demand, it is anticipated that the present demand will surpass 2022 and 2019, thanks to China’s modification of disease protection policies, and China’s economic statistics is also promising. The issue is whether this upbeat outlook will catch on elsewhere and increase demand for petroleum oil. To our knowledge, the present banking crisis will not follow the same path as the financial crisis of 2008. The market is not surprised by this news because Credit Suisse’s issues have been previously revealed. With regards to the energy market, the greatest question mark is whether or not the Federal Reserve will increase interest rates next week. One hundred basis points in interest rate cuts are also anticipated by the market for this year. Effects on the energy market will become more apparent in the subsequent months. There is upward pressure on oil prices due to tightening supplies and strengthening demand, but the level of unpredictability is too high for us to sit on the margins for the time being.
