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Oil Prices Fall on Strong Dollar, Global Growth Concerns

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Crude oil traded lower on Monday and was on track for its largest monthly decline in over two years, as concerns over global growth clouded the market’s energy outlook. Commodity markets were also being pressured by the U.S. dollar, which is currently testing two-month highs against a basket of competitor currencies.

Crude Sinks

The West Texas Intermediate (WTI) benchmark for U.S. crude futures fell by as much as 1.4% on Monday, reaching a low of $66.67 a barrel on the New York Mercantile Exchange. That would have marked the second-lowest settlement in over two months. At the time of writing, WTI Nymex crude was down 42 cents, or 0.6%, to $67.17 a barrel.

Brent crude, the international futures benchmark, declined 1% to an intraday low of $76.81 a barrel. Brent was last down 31 cents, or 0.4%, at $77.31 a barrel.

Oil prices are on track for their worst monthly performance since mid-2016.

Demand Constraints, Oversupply Concerns

A combination of demand constraints and higher commercial inventories have kept oil prices firmly capped the past four weeks. On the demand side, a slowdown in global growth has raised the risk of declining consumption in key emerging markets, most notably China.

The Chinese economy expanded 6.5% annually in the third quarter, a nine-year low, following a wave of protectionist tariffs lobbed at Beijing by the Trump administration. The threat of an escalating trade war prompted the International Monetary Fund (IMF) to lower its outlook on global growth in the next two years.

China’s economic slowdown has been accompanied by a multi-trillion-dollar selloff in domestic stocks. Recently, the selloff shifted to Wall Street, where the major indexes entered correction territory. The global equity shakedown has placed downward pressure on industrial commodities, which have also come under attack from a rising U.S. dollar. The U.S. dollar index (DXY) peaked at 96.70 on Monday, the highest in over two months.

On the supply side, Saudi Arabia and Russia are ramping up production ahead of U.S.-led sanctions on Iran coming into effect later this week. This ramp up is expected to diffuse the loss of Iranian barrels.

These conditions are making fund managers more bearish on oil than at any time since July 2017. According to Reuters, fund managers have slashed their bullish positions on oil futures and options for four consecutive weeks. Data from Intercontinental Exchange and the U.S. Commodity Futures Trading Commission show that bullish positions have plunged by a third in four weeks.

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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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4.6 stars on average, based on 704 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Plunge Below $48 a Barrel on Oversupply Concerns; Saudi Arabia Announces Budget

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Oil prices touched new yearly lows on Tuesday, as traders continued to doubt plans by OPEC and its allies to drain excess supply from the market. Escalating trade tensions between the United States and China exacerbated the early-morning selloff after President Xi Jinping echoed his country’s growing economic prowess, sending a clear signal that Beijing will not back down in a trade war.

Oil Resumes Slide

Oil futures in New York and London fell on Tuesday to their lowest levels in over a year. The U.S. West Texas Intermediate (WTI) benchmark fell as much as 4.1% overnight before paring losses later in the day. It was last down $1.20, or 2.4%, to trade at $48.68 a barrel on the New York Mercantile Exchange. Brent crude established a new yearly bottom at $57.20 a barrel. At press time, the contract was down $1.07, or 1.8%, at $58.54 a barrel.

Energy markets got no reprieve from a sliding U.S. dollar, which now sits at its lowest level in 11 days. The dollar index (DXY) declined 0.1% to 96.97.

Crude has fallen into a protracted bear market amid slowing economic growth and signs of oversupply. Efforts by the Organization of Petroleum Exporting Countries (OPEC) to rein in excess supplies have failed to convince traders that the market will return to balance.

Saudis Announce Budget

Saudi Arabia has no plans to curtail citizens’ living expenses in 2019 despite the latest drop in oil prices. According to the kingdom’s new budget blueprint, state spending will grow 7% next year to $1.106 trillion riyals ($295 billion). That’s in line with the September budget, when international crude prices were valued at $80 a barrel.

According to analysts, the cost-of-living outlays are expected to help boost sluggish economic growth and reaffirm support for Crown Prince Mohammed bin Salman following a string of controversies that have caught international attention.

Xi on China’s Return to Power

Chinese President Xi Jinping on Tuesday reaffirmed his country’s return to power in an 80-minute speech to the Communist Party in Beijing. The speech, which was intended to mark the 40th anniversary of the “Reform and Opening Up” campaign, sent a clear signal that Beijing will not back down against U.S. trade threats.

“No one is in the position to dictate to the Chinese people what should and should not be done,” Xi said, according to Bloomberg.

The remarks came days after government data confirmed the biggest slowdown in retail sales growth in over 15 years. Sluggish retail sales and industrial production figures are the latest in a series of reports signaling a broad cool down in domestic growth. Although this trend long predated the Trump administration, Washington’s escalating trade war appears to have made matters worse.

China and the United States are currently locked in a 90-day negotiation round aimed at resolving the trade dispute. Key milestones have been reached but a comprehensive deal has not yet been achieved.

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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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4.6 stars on average, based on 704 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Give Up Gains, WTI Tests $50 a Barrel amid Global Growth Risks

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The price of oil turned lower on Monday in choppy trading characterized by heightened concern over global economic growth and supply/demand imbalances. So far, the market has failed to turn a corner following a decision by OPEC and its allies to trim crude production by 1.2 million barrels per day.

Crude Under Pressure

Following an early-morning rally, crude prices were back on the defensive Monday. The West Texas Intermediate (WTI) benchmark reached a low of $50.20 a barrel on the New York Mercantile Exchange after previously hitting a high of $51.87 a barrel. At the time of writing, WTI was down 61 cents, or 1.2%, at $50.59 a barrel.

Brent crude, the international futures benchmark, briefly traded below $60 a barrel, down from an intraday high of $61.21. It was last seen trading at $60.06 a barrel, down 22 cents, or 0.4%, from Friday’s close.

Oil prices were supported earlier in the session by a weakening U.S. dollar. The dollar index (DXY), which tracks the greenback’s performance against a basket of six peers, fell 0.3% to 97.19.

OPEC Shake-Up

The oil-price collapse and concerns about the future have forced some of OPEC’s biggest producers to delay projects. On Monday, Kuwait’s Oil Minister Bakheet Al-Rashidi formally resigned from his post. According to Bloomberg News, two top executives at the state-run Kuwait Oil Co. have also stepped down.

Kuwait is the fifth-largest producer within the Organization of Petroleum Exporting Countries. Like Saudi Arabia, the vast majority of the public’s revenue come from the energy sector.

As Hacked previously reported, Qatar is planning to exit the 15-member producer group next year to focus on developing its natural gas industry.

Inventories Rise

Crude prices have also been pressured by rising stockpiles in the United States. Data from Genscape Inc. recently revealed an inventory build of 630,000 barrels in Cushing, Oklahoma, the nation’s biggest storage facility.

U.S. commercial crude inventories fell in the most recent week but have been trending higher throughout the fourth quarter. The American Petroleum Institute (API) is set to release its weekly inventory report Tuesday. The official data, courtesy of the U.S. Energy Information Administration (EIA) will be published Wednesday morning.

Rising stockpiles and a slowdown in global economic growth are expected to keep oil prices on the defensive for much of 2019. Chinese economic data on Friday confirmed a sharp slowdown in the world’s second-largest economy, a trend that has direct implications on the nation’s energy consumption.

Featured image courtesy of Shutterstock.

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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4.6 stars on average, based on 704 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Rally Slows amid Reports of OPEC Infighting

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Crude oil is under pressure Thursday as reports of OPEC infighting cast doubts about the cartel’s ability to rein in production in 2019. Saudi Arabia, the group’s de facto leader, is also under attack following an IEA reporting showing record output from the kingdom in November.

Rally Sputters

The rally in crude prices appears to be choppy and short-lived since last week’s high-profile production meeting in Vienna, Austria. On Thursday, U.S. West Texas Intermediate (WTI) futures were down 34 cents or 0.7%, to trade at $50.81 a barrel on the New York Mercantile Exchange. The January futures contract reached a session low of $50.35 a barrel.

Brent crude, the international futures benchmark, bottomed at $59.33 a barrel on London’s ICE futures exchange. At the time of writing, it was down 35 cents, or 0.6%, to $59.80 a barrel.

Record Production

The International Energy Agency (IEA) reported Thursday that crude production among OPEC members reached record highs in November, casting doubts about the planned output cuts by Saudi Arabia and its allies. The 15-member cartel churned out 33.03 million barrels per day in November, a net gain of 100,000 barrels per day over the previous month.

Gains were driven entirely by two members: Saudi Arabia and the United Arab Emirates. Saudi’s daily production jumped 410,000 barrels to 11.06 million barrels, a new record high. The UAE saw its output climb by 110,000 barrels per day to reach 3.33 million barrels per day. In doing so, the UAE surpassed Iran as the group’s third-largest producer.

IEA data contrasts sharply with the official OPEC report, which showed a slight decrease for the month of November. More importantly, it raised suspicion that the Saudis are not intent on lowering production by any significant amount in the new year but are simply paring back from record levels.

Political Headwinds

The Saudis are facing pressure from within the producer group and from the United States on issues ranging from production policy, the war on Yemen and the killing of Jamal Khashoggi. Bloomberg reports that Iran’s oil minister Bijan Zanganeh has vocalized serious political disagreements within the cartel that came to light during last week’s production meeting in Vienna. What’s more, Qatar is planning to quit the producer group in the new year to focus on natural gas production. This may exacerbate the geopolitical rift between Doha and a Saudi-led coalition of Arab states that have blockaded the tiny Gulf country.

In a rare show of bipartisan support, the U.S. Senate last month voted to end support for Saudi Arabia’s devastating war on Yemen. The vote came as the CIA offered irrefutable evidence that Saudi Crown Prince Mohammed bin Salman (MbS) was party to the killing and dismemberment of U.S.-based journalist Jamal Khashoggi.

You have to be willfully blind not to come to the conclusion that this was orchestrated and organized by people under the command of MbS,” Republican Senator Lindsey Graham said earlier this month.

Featured image courtesy of Shutterstock.

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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4.6 stars on average, based on 704 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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