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Iran Divides OPEC Once Again, Calls for $65 a Barrel Crude

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The Islamic Republic of Iran has notified fellow OPEC members that it does not support the relentless rise in crude prices, signaling a sharp split with regional foe Saudi Arabia, whose effort to re-balance the market has driven international crude past $75 a barrel.

“Suitable Price” for Crude

Iran believes that $60 to $65 a barrel constitutes a “suitable price” for oil, according to The Wall Street Journal, which cited an interview with the country’s deputy oil minister on Sunday. Oil Minister Bijan Namdar Zanganeh also stated that his country supports “reasonable” crude values and is not an advocate of ever-increasing price points.

Faced with the possibility of new U.S. sanctions, Iran could lose out on market share if the West decides to limit how much crude it can export beyond its borders. The country is home to the world’s largest proven reserves of natural gas.

“We strongly believe the oil market should not be political,” Zanganeh said, as quoted by WSJ. “Political interference will disrupt the process of development and exchange in the market.”

Iran’s outlook on crude contrasts sharply with the Saudi-led Organization of the Petroleum Exporting Countries (OPEC), which is targeting prices closer to $80 a barrel. Saudi Arabia and Russia have agreed to extend their production cuts until the end of 2018 in an effort to re-balance the global market. Both nations, as well as other OPEC members, have achieved record compliance in light of the agreement.

In April, the cartel and its allies reduced output by 70,000 barrels per day, bringing their collective production levels to 32.12 million barrels. The decline was largely attributed to Venezuela, whose production continues to deteriorate as the country copes with severe supply disruptions. Last month, Venezuela offered India a 30% discount on crude shipments if it pays with the petro, a cryptocurrency backed by the Venezuelan government.

Crude Trades at Multi-Year High

Oil prices rose on Friday amid speculation that the Trump administration would re-impose sanctions on Iran. Brent crude, the international futures contract, closed at $74.87 a barrel on London’s ICE exchange. The contract was last seen trading at $74.95 a barrel, having gained more than 51% over year ago levels.

The West Texas Intermediate (WTI) benchmark for U.S. crude futures ended at $69.72 a barrel Friday, its highest in over three years. It was last seen hovering around $69.79 a barrel.

The relentless rise in crude prices has encouraged the resumption of the U.S. shale boom, which threatens to disrupt the global supply/demand balance. Analysts at J.P. Morgan Chase believe oil prices will gravitate back down to $50 a barrel as U.S. output continues to ramp up.

As Hacked reported in March, at least six U.S. oil producers have reduced their break-even points over the past three years, with the likes of Exxon, Shell, Conoco Phillips, EOG, Chevron, Pioneer and Continental able to maintain market share with prices at or below $40 a barrel.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Prices Get a Boost from Tame Inflation Data

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Gold prices headed higher on Wednesday after government data showed the smallest annual increase in consumer inflation in well over a year, giving the Federal Reserve more reason to hold off on raising interest rates.

Precious Metals Rise

Gold for April delivery climbed $2.50, or 0.2%, to $1,316.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Bullion peaked at $1,321.70 on Wednesday, its highest in nearly two weeks.

Silver futures peaked at $15.80 a troy ounce, a new weekly high. The March contract was last seen trading at $15.78 a troy ounce, having gained 9 cents, or 0.6%.

Precious metals have seen their gains evaporate over the past two weeks, as an ascendant U.S. dollar pressured commodity prices. Gold and silver appear to be stabilizing this week despite the greenback’s continued strength. The U.S. dollar index (DXY), which measures the performance of the greenback against a basket of six rivals, rose 0.3% to 96.99.

Risk of Inflation Has Diminished

U.S. consumer prices flat-lined in January for a third month in a row, as volatile oil prices kept inflation in check. The consumer price index (CPI) remained unchanged in January, the Department of Labor reported Wednesday, confounding expectations for a 0.1% increase. In annualized terms, CPI rose just 1.6%, the weakest in over a year.

Stripping away food and energy costs, the so-called core consumer price index nudged up 0.2% in January and 2.2% annually, official data showed.

Following a volatile fourth quarter that saw stock markets plunge and global economic risks escalate, the Federal Reserve last month stressed ‘patience’ in normalizing monetary policy. The January policy statement signaled a dramatic shift in guidance from last year, when central bankers voted to raise interest rates four times. According to Fed Fund futures prices, the central bank is more likely to cut interest rates before raising them again.

The latest batch of CPI data echoed recent comments by Fed Chair Jerome Powell, who said the risks of higher inflation have diminished. This comes despite strong labor market fundamentals and continued economic growth.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Oil Prices Recover as Saudi Arabia Takes Drastic Measures to Rebalance Market

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Oil prices rebounded Tuesday after Saudi Arabia announced a new round of production cuts that were far larger than initially reported. The move comes amid growing doubts that the kingdom will be able to balance its budget this year.

Crude Rallies

The West Texas Intermediate (WTI) benchmark for U.S. crude futures topped $54.00 a barrel for the first time in six days. The contract was last seen trading at $53.42 a barrel, having gained $1.02, or 2%. International benchmark Brent crude futures advanced $1.18, or 1.9%, to $62.69 a barrel in London.

Crude prices declined sharply at the start of the week and have been directionless for the past month as traders assessed the impact of slowing global growth on energy demand. A lack of progress on the trade front between the United States and China has also added to the pressure. A new deal that keeps goods and services flowing is considered essential for the Chinese economy, which is a major consumer of energy.

Saudi Arabia Announces Deeper Output Cuts

Saudi Arabia announced Tuesday that It will reduce oil production to nearly 9.8 million barrels per day beginning in March, well below the production quota agreed to in December. Against current levels, that represents a drop of over half a million barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC), an oil cartel made up mainly of Arab states, removed 797,000 barrels per day from the market last month, according to its latest report. The group had initially vowed to reduce output by 812,000 barrels per day during the month.

Saudi Arabia, the group’s de facto leader, is under growing pressure to boost prices after announcing a lofty budget for 2019. The blueprint seeks to boost spending by 7% in order to kick start a sluggish economy. According to the International Monetary Fund, oil must return above $80 a barrel for the kingdom to balance its budget.

Crude Oil: A New World Order Emerges

Brent futures peaked north of $86 a barrel in early October before reversing more than 42% over the next three months. A sluggish global economy and rising U.S. output have pressured the market and made it more difficult for OPEC to achieve its target.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Bullish Dollar Threatens Gold’s Resurgence

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Gold prices tumbled on Monday, as the dollar retained its bullishness amid ongoing trade tensions between the United States and China. At this stage, a comprehensive trade deal between the two superpowers appears highly unlikely before the March 1 deadline.

Gold Loses Its Shine

The April futures contract for gold reached a session low of $1,307.10 a troy ounce, the lowest since Jan. 25. The contract was last down $8.30, or 0.6%, at $1,310.30 a troy ounce on the Comex division of the New York Mercantile Exchange. Bullion is down 1.2% from its nine-month peak last set on Jan. 31.

Silver futures, which often trade in the same direction as gold, bottomed at $15.66 a troy ounce on Monday. The grey metal is teetering on three-week lows, having declined 10 cents, or 0.7%, to $15.71 a troy ounce.

The gold/silver ratio that is used to determine when to buy and sell precious metals has fallen to 83.20 from a peak near 87.00 in December. This basically states that 83.20 ounces of silver are needed to buy one ounce of gold at current prices.

Dollar Rebuffs Dovish Fed

The U.S. dollar continued to surge on Monday, as traders shrugged off the Federal Reserve’s dovish turn amid ongoing trade tensions with China. The dollar index (DXY), a broad-based measure of the greenback’s performance, climbed 0.3% to 96.93. That was the highest level in over a month. Since bottoming at 95.34 on Jan. 31, DXY ha gained 1.7%.

A stronger dollar tends to undercut greenback-denominated assets such as gold and silver, making them more expensive for holders of other currencies.

The greenback is expected to strengthen in the near term as traders look for safety nets amid global economic uncertainty. With the United States and China set to miss a self-imposed trade-deal deadline, the return of tariffs could place further downward pressure on the world’s second-largest economy.

Washington and Beijing have until Mar. 1 to reach a new trade deal before U.S. tariffs on Chinese goods are reinstated. Despite progress being made in January, both sides remain “miles and miles apart” on a new deal, according to Commerce Secretary Wilbur Ross.

The ongoing Brexit saga is also making the dollar more attractive relative to the British pound. The dollar-pound (GBP/USD) exchange rate fell 0.5% to on Monday to 1.2876, its lowest in three weeks. Related: GBP/USD Price Prediction: Cable Could be Hit Harder This Week

A weakening Eurozone economy is also weighing on the euro, the region’s common currency. Like the pound, the euro is trading near its lowest level in three weeks versus the dollar. The EUR/USD exchange rate was last down 0.2% at 1.1296.

Featured image courtesy of Shutterstock. Charts via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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