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Oil Prices Post Biggest Drop in a Year as Russia, OPEC Weigh Abandoning Output Deal

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Oil prices sold off Friday at their fastest pace in a year after major energy producers said they may soon begin lowering production limits.

Energy Ministers Weigh Easing Output Caps

A group of two-dozen producer nations are considering a gradual exit from an output deal put in place last year to rebalance an oversupplied crude market. Under the deal, Russia, OPEC and others agreed to reduce crude supplies by 1.8 million barrels per day.

Russia was especially vocal about lowering and eventually abandoning output quotas in support of a balanced market after Moscow’s energy minister met with his Saudi counterpart in St. Petersburg.

“The moment is coming when we should consider assessing ways to exit the deal very seriously and gradually ease quotas on output cuts,” Russian energy minister Alexander Novak said, according to Reuters.

Russian President Vladimir Putin also said Friday his country does not support runaway oil prices, a sign that the world’s largest energy producer was prepared to ramp up production soon.

“We’re not interested in an endless rise in the price of energy and oil,” Putin said in St. Petersburg on Friday. “I would say we’re perfectly happy with $60 a barrel. Whatever is above that can lead to certain problems for consumers, which also isn’t good for producers.”

The Russian leader echoed previous comments made by Iranian officials, who indicated that a range of $60 to $65 a barrel was fair market value for crude. The Saudis, meanwhile, were said to be targeting prices above $80 a barrel.

OPEC and its allies are planning to gather in their Vienna headquarters June 22 to discuss a new output deal. Output will most likely increase, though the details of the production rise remain unclear.

Oil Prices Sink

U.S. West Texas Intermediate (WTI) futures plunged 4.2% to $67.70 a barrel, the biggest fall since June 2017. The contract settled at worst level in over three weeks.

Brent crude fell 3.1% to $76.39 a barrel, its lowest since May 8. The international futures benchmark traded above $80 a barrel last week for the first time since 2014.

Energy shares were dragged along for the ride, as the sector fell 2.6%. Dow industrials Chevron Corp and Exxon Mobil Corp fell 3.5% and 1.9%, respectively.

Featured image courtesy of Shutterstock. 

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4.6 stars on average, based on 610 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Commodities

Oil Prices are Surging Again as Supply Pressures Build

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Crude oil is on track for its fourth gain in five days after U.S. government data showed a much larger than expected draw in commercial crude inventories last week, adding to growing evidence of supply pressures.

Oil Price Update

U.S. West Texas Intermediate (WTI) for October settlement rose $1.68, or 2.6%, yo $67.52 a barrel on the New York Mercantile Exchange. The black commodity is on track for its highest settlement in 12 days after prices plunged to multi-month lows last week. The U.S. benchmark has gained 4.5% over the past five days.

Brent crude, the international futures contract, rose $1.68, or 2.3%, to $74.31 a a barrel on London’s ICE futures exchange. Brent futures have returned 4.8% over the last five days.

Inventories Drop

The U.S. Energy Information Administration (EIA) reported Wednesday that commercial crude inventories fell by 5.836 million barrels in the week ended Aug. 18. Analysts in a median estimate had called for a decline of 1.497 million barrels. Inventories spiked by 6.805 million barrels the previous week as imports surged.

In gasoline, EIA reported a build of 1.2 million barrels and an average production of 10.2 million barrels per day.

EIA’s report corroborated separate industry data showing a large draw in inventories last week. The American Petroleum Institute (API) on Tuesday reported a decline of 5.17 million barrels. According to analysts, this may have sparked the early morning rally leading up to the EIA report.

Earlier in the week, the U.S. government announced it would sell 11 million barrels from the Strategic Petroleum Reserve to keep the market well supplied in anticipation of renewed sanctions on Iran.

Dollar Softens

The U.S. dollar’s recent struggle to hold 13-month highs has also contributed to crude’s upward momentum. The U.S. dollar index (DXY), which tracks the greenback’s performance against a basket of six currencies, declined 0.2% to 95.10, a fresh two-week low. Since peaking at 96.73 on Aug. 14, DXY has declined 1.7%.

DXY has gained 3.1% since New Year’s Day in what has been a dramatic reversal for the greenback, which got off to one of the worst starts to a year in decades.

Oil and the dollar often exhibit an inverse relationship due to the fact that futures contracts are priced in greenbacks. A decline in the value of the dollar makes oil futures more attractive for holders of other currencies.

Global trade tensions and multiple interest rate hikes on the home front are expected to keep the dollar on firm footing in the near term. Next month, the Federal Reserve is widely expected to raise interest rates for the third time this year, possibly paving the way for a fourth upward adjustment in December.

Based on Fed Fund futures prices, the likelihood of a September rate hike is currently pegged at 96%. The probability of another lift-off in December is 62.8%.

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 610 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Platinum Update: Faces Life or Death Showdown

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The Platinum/US Dollar (XPT/USD) pair has been in a decade-long downtrend. In July 2008, the pair broke out of a double top pattern on the weekly chart after taking out support of $1,850. There were numerous attempts to reverse the trend and break out of the slump. However, every single effort was denied as bears held $1,850 resistance. As a result, XPT/USD is now trading around $800.

While bears seem to have the upper hand, there’s a case for a bullish reversal. In this article, we explore the bearish and bullish scenarios for the XPT/USD pair.

The Bearish Case for Platinum

In technical analysis, the prevailing trend remains until there’s a clear sign of trend reversal. As mentioned, XPT/USD is still in a downtrend. The downtrend was recently confirmed by a breakout from sideways consolidation on the daily chart in June 2018.


XPT/USD daily chart

The breakout quickly brought XPT/USD down to $800 support. While bulls are managing to hold on, it appears that their mettle will be tested soon.

Large Descending Triangle on the Monthly

The descending triangle is often a continuation pattern with a bearish bias. The lower highs of this pattern put enormous pressure on the support that it eventually snaps. We see this pattern emerging on the monthly chart of Platinum/US Dollar.

XPT/USD monthly chart

The pattern is enormous. It is large enough to keep many retail investors on the sidelines. From the looks of it, XPT/USD appears to have just completed the E-wave or the final dead cat bounce. With a new lower high in place, bulls are in for the fight of their life at $800.

The Bullish Case for Platinum

The good news for the bulls is that not all descending triangles are bearish. Sometimes, bulls use the price compression at the apex to take out the resistance.

The key issue to understand is that the pattern must be triggered first. If bears take out $800, then the market sinks deeper. If bulls breach the resistance, then that might just be enough to kickstart a bull run.

Double Bottom on the Monthly

If bulls win this battle, then many investors will look at the possibility of a double bottom reversal pattern on the monthly chart.

Possible double bottom of XPT/USD

The preservation of $800 support amidst the threat of a huge descending triangle paints a bullish picture. It should send a reverberating message that $800 is bull territory. This would attract all types of investors and may generate sufficient momentum to push the market back up to previous highs and create a double bottom reversal pattern.

Bottom Line

Bulls and bears are bound to have a showdown at the $800 support level. Whoever wins this fight gets to control the market in the coming months or even years. Bears have the upper hand but it looks like bulls have what it takes to pull out one big surprise.

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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3.6 stars on average, based on 237 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Commodities

Gold Price Is Getting Crushed as Dollar Reaches New 2018 Highs

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Gold’s brisk selloff deepened Thursday, as investors put higher interest rates on the front burner following two days of testimony from Federal Reserve Chairman Jerome Powell.

Gold Price Levels

According to Bloomberg data, the price of gold bottomed at $1,212.70 a troy ounce on Thursday, extending a three-month selloff that has shaved 11% from the yellow metal’s value. Gold peaked slightly above $1,360 in March and April before plunging over the next three months.

Bullion is trading at its lowest level in over a year, with technical charts putting the next major support level around $1,200-$1,202 an ounce.

Silver, which often trades in the direction of gold, was off more than 2% Thursday to a low of $15.19 a troy ounce. The grey metal later recovered around $15.30 but was still down more than 12% from January’s settlement high of $17.61.

Dollar Rally Intensifies

A surging dollar has largely underpinned the massive exodus out of gold over the last three months. The U.S. dollar index (DXY), which tracks the performance of the greenback against a basket of currencies, has gained nearly 7% compared to three months ago. DXY is up 3.6% for the year, more than offsetting its worst annual start in decades.

On Thursday, the dollar index rose more than half a percent to a high of 95.65, its best level of the year.

The dollar’s strength combined with Brexit woes triggered a fresh slide in the British pound, which fell on Thursday to its lowest since August.

The Canadian dollar declined sharply on tariff fears, sending the USD/CAD currency pair to its highest level of the month.

A stronger U.S. currency makes the purchase of gold and other commodities more costly for international buyers, which reduces their relative demand. On Wall Street, investors have shown a renewed penchant for stocks in anticipation of a strong earnings quarter.

Fed Chairman Jerome Powell on Thursday wrapped up his semiannual testimony before Congress where he fielded questions on the economy, protectionism and cryptocurrency. Although Powell didn’t strike an overly hawkish tone, he left little doubt about the central bank’s plan to raise short-term interest rates.

On Wednesday, Powell told lawmakers they can expect several years of economic growth under the current policy regime.

“With appropriate monetary policy, the job market will remain strong and inflation will stay near 2% over the next several years,” Powell said in prepared remarks.

The central bank “believes that – for now – the best way forward is to keep gradually raising the federal funds rate” in a way that keeps pace with the economic recovery, he added.

Federal Open Market Committee (FOMC) members will next meet July 31-Aug. 1 to set short-term interest rates. No change is expected before September.

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 610 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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