Archive for Financial News – Page 157

18 Feb

Soft Commodities Charts: Weekly Speculator bets led by Cotton & Sugar

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) reports data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday February 13th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Weekly Speculator Changes led by Cotton & Sugar

The COT soft commodities markets speculator bets were higher this week as seven out of the eleven softs markets we cover had higher positioning while the other four markets had lower speculator contracts.

Leading the gains for the softs markets was Cotton (24,092 contracts) with Sugar (11,631 contracts), Soybean Oil (9,985 contracts), Wheat (9,277 contracts), Coffee (5,101 contracts), Live Cattle (4,440 contracts) and Lean Hogs (1,384 contracts) also showing positive weeks.

The markets with the declines in speculator bets this week were Corn (-16,517 contracts), Soybean Meal (-11,545 contracts), Cocoa (-8,763 contracts) and Soybeans (-934 contracts) also registering lower bets on the week.

Speculators Leaderboard

Legend: Weekly Speculators Change | Speculators Current Net Position | Speculators Strength Score compared to last 3-Years (0-100 range)

Strength Scores led by Coffee & Cotton

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that Coffee (89 percent) and Cotton (72 percent) lead the softs markets this week. Cocoa (60 percent), Wheat (47 percent) comes in as the next highest in the weekly strength scores.

On the downside, Soybean Meal (0 percent), Corn (0 percent), Soybeans (0 percent) and the Soybean Oil (8 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
Corn (0.0 percent) vs Corn previous week (2.1 percent)
Sugar (23.9 percent) vs Sugar previous week (19.7 percent)
Coffee (89.0 percent) vs Coffee previous week (83.8 percent)
Soybeans (0.0 percent) vs Soybeans previous week (0.2 percent)
Soybean Oil (8.0 percent) vs Soybean Oil previous week (2.1 percent)
Soybean Meal (0.0 percent) vs Soybean Meal previous week (5.2 percent)
Live Cattle (36.7 percent) vs Live Cattle previous week (31.9 percent)
Lean Hogs (31.0 percent) vs Lean Hogs previous week (29.8 percent)
Cotton (71.9 percent) vs Cotton previous week (53.8 percent)
Cocoa (60.3 percent) vs Cocoa previous week (69.2 percent)
Wheat (47.4 percent) vs Wheat previous week (40.9 percent)

 

Cotton & Live Cattle top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that Cotton (59 percent) and Live Cattle (25 percent) lead the past six weeks trends for soft commodities. Lean Hogs (25 percent), Coffee (17 percent) and Sugar (6 percent) are the next highest positive movers in the latest trends data.

Soybeans (-34 percent) leads the downside trend scores currently with Soybean Meal (-33 percent), Cocoa (-20 percent) and Corn (-13 percent) following next with lower trend scores.

Strength Trend Statistics:
Corn (-12.6 percent) vs Corn previous week (-12.9 percent)
Sugar (6.3 percent) vs Sugar previous week (0.7 percent)
Coffee (17.1 percent) vs Coffee previous week (11.3 percent)
Soybeans (-33.9 percent) vs Soybeans previous week (-36.1 percent)
Soybean Oil (4.7 percent) vs Soybean Oil previous week (-0.5 percent)
Soybean Meal (-32.5 percent) vs Soybean Meal previous week (-33.7 percent)
Live Cattle (24.7 percent) vs Live Cattle previous week (17.6 percent)
Lean Hogs (24.7 percent) vs Lean Hogs previous week (17.6 percent)
Cotton (58.9 percent) vs Cotton previous week (42.3 percent)
Cocoa (-20.0 percent) vs Cocoa previous week (-9.6 percent)
Wheat (3.2 percent) vs Wheat previous week (-4.8 percent)

Individual Soft Commodities Markets:

CORN Futures:

CORN Futures COT ChartThe CORN large speculator standing this week was a net position of -245,939 contracts in the data reported through Tuesday. This was a weekly lowering of -16,517 contracts from the previous week which had a total of -229,422 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 95.5 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

CORN Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:17.545.49.8
– Percent of Open Interest Shorts:32.729.010.9
– Net Position:-245,939263,504-17,565
– Gross Longs:281,214730,978157,423
– Gross Shorts:527,153467,474174,988
– Long to Short Ratio:0.5 to 11.6 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.0100.095.5
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-12.611.616.2

 

SUGAR Futures:

SUGAR Futures COT ChartThe SUGAR large speculator standing this week was a net position of 92,155 contracts in the data reported through Tuesday. This was a weekly lift of 11,631 contracts from the previous week which had a total of 80,524 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 23.9 percent. The commercials are Bullish with a score of 75.1 percent and the small traders (not shown in chart) are Bearish with a score of 28.2 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SUGAR Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:20.855.88.5
– Percent of Open Interest Shorts:10.468.56.2
– Net Position:92,155-112,13819,983
– Gross Longs:184,125493,07675,081
– Gross Shorts:91,970605,21455,098
– Long to Short Ratio:2.0 to 10.8 to 11.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):23.975.128.2
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:6.3-6.13.4

 

COFFEE Futures:

COFFEE Futures COT ChartThe COFFEE large speculator standing this week was a net position of 60,084 contracts in the data reported through Tuesday. This was a weekly boost of 5,101 contracts from the previous week which had a total of 54,983 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.0 percent. The commercials are Bearish-Extreme with a score of 14.8 percent and the small traders (not shown in chart) are Bearish with a score of 32.1 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

COFFEE Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:36.837.64.0
– Percent of Open Interest Shorts:10.065.03.4
– Net Position:60,084-61,4421,358
– Gross Longs:82,47984,3988,905
– Gross Shorts:22,395145,8407,547
– Long to Short Ratio:3.7 to 10.6 to 11.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):89.014.832.1
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:17.1-16.4-2.7

 

SOYBEANS Futures:

SOYBEANS Futures COT ChartThe SOYBEANS large speculator standing this week was a net position of -161,751 contracts in the data reported through Tuesday. This was a weekly lowering of -934 contracts from the previous week which had a total of -160,817 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 99.9 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 81.2 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SOYBEANS Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:11.359.36.9
– Percent of Open Interest Shorts:32.337.08.2
– Net Position:-161,751171,638-9,887
– Gross Longs:86,975456,22952,898
– Gross Shorts:248,726284,59162,785
– Long to Short Ratio:0.3 to 11.6 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.099.981.2
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-33.932.48.6

 

SOYBEAN OIL Futures:

SOYBEAN OIL Futures COT ChartThe SOYBEAN OIL large speculator standing this week was a net position of -24,616 contracts in the data reported through Tuesday. This was a weekly increase of 9,985 contracts from the previous week which had a total of -34,601 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 8.0 percent. The commercials are Bullish-Extreme with a score of 95.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.4 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SOYBEAN OIL Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:19.049.65.0
– Percent of Open Interest Shorts:23.445.05.1
– Net Position:-24,61625,463-847
– Gross Longs:105,702275,76827,680
– Gross Shorts:130,318250,30528,527
– Long to Short Ratio:0.8 to 11.1 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):8.095.010.4
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:4.7-2.8-10.1

 

SOYBEAN MEAL Futures:

SOYBEAN MEAL Futures COT ChartThe SOYBEAN MEAL large speculator standing this week was a net position of -45,467 contracts in the data reported through Tuesday. This was a weekly reduction of -11,545 contracts from the previous week which had a total of -33,922 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 30.9 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SOYBEAN MEAL Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:16.149.59.8
– Percent of Open Interest Shorts:25.343.66.4
– Net Position:-45,46728,73016,737
– Gross Longs:79,737244,53948,351
– Gross Shorts:125,204215,80931,614
– Long to Short Ratio:0.6 to 11.1 to 11.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.0100.030.9
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-32.529.724.9

 

LIVE CATTLE Futures:

LIVE CATTLE Futures COT ChartThe LIVE CATTLE large speculator standing this week was a net position of 53,594 contracts in the data reported through Tuesday. This was a weekly lift of 4,440 contracts from the previous week which had a total of 49,154 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.7 percent. The commercials are Bullish with a score of 62.9 percent and the small traders (not shown in chart) are Bullish with a score of 65.2 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

LIVE CATTLE Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:34.037.611.1
– Percent of Open Interest Shorts:15.354.712.7
– Net Position:53,594-48,988-4,606
– Gross Longs:97,639108,02331,859
– Gross Shorts:44,045157,01136,465
– Long to Short Ratio:2.2 to 10.7 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):36.762.965.2
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:24.7-24.6-14.8

 

LEAN HOGS Futures:

LEAN HOGS Futures COT ChartThe LEAN HOGS large speculator standing this week was a net position of 1,579 contracts in the data reported through Tuesday. This was a weekly gain of 1,384 contracts from the previous week which had a total of 195 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.0 percent. The commercials are Bullish with a score of 72.5 percent and the small traders (not shown in chart) are Bullish with a score of 61.7 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: New Buy – Long Position.

LEAN HOGS Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:33.439.18.7
– Percent of Open Interest Shorts:32.737.611.0
– Net Position:1,5793,243-4,822
– Gross Longs:70,92882,94718,474
– Gross Shorts:69,34979,70423,296
– Long to Short Ratio:1.0 to 11.0 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):31.072.561.7
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:24.7-27.55.4

 

COTTON Futures:

COTTON Futures COT ChartThe COTTON large speculator standing this week was a net position of 83,935 contracts in the data reported through Tuesday. This was a weekly lift of 24,092 contracts from the previous week which had a total of 59,843 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 71.9 percent. The commercials are Bearish with a score of 27.6 percent and the small traders (not shown in chart) are Bullish with a score of 68.4 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

COTTON Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:40.336.87.1
– Percent of Open Interest Shorts:7.273.23.7
– Net Position:83,935-92,5658,630
– Gross Longs:102,36093,50517,952
– Gross Shorts:18,425186,0709,322
– Long to Short Ratio:5.6 to 10.5 to 11.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):71.927.668.4
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:58.9-59.557.6

 

COCOA Futures:

COCOA Futures COT ChartThe COCOA large speculator standing this week was a net position of 49,351 contracts in the data reported through Tuesday. This was a weekly decrease of -8,763 contracts from the previous week which had a total of 58,114 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.3 percent. The commercials are Bearish with a score of 37.0 percent and the small traders (not shown in chart) are Bullish with a score of 58.8 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

COCOA Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:35.231.46.1
– Percent of Open Interest Shorts:17.051.64.0
– Net Position:49,351-54,8225,471
– Gross Longs:95,56285,41516,442
– Gross Shorts:46,211140,23710,971
– Long to Short Ratio:2.1 to 10.6 to 11.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):60.337.058.8
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-20.014.742.4

 

WHEAT Futures:

WHEAT Futures COT ChartThe WHEAT large speculator standing this week was a net position of -29,007 contracts in the data reported through Tuesday. This was a weekly rise of 9,277 contracts from the previous week which had a total of -38,284 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.4 percent. The commercials are Bullish with a score of 51.8 percent and the small traders (not shown in chart) are Bearish with a score of 45.5 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

WHEAT Futures StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:31.536.47.5
– Percent of Open Interest Shorts:38.927.88.7
– Net Position:-29,00733,760-4,753
– Gross Longs:124,909143,96929,853
– Gross Shorts:153,916110,20934,606
– Long to Short Ratio:0.8 to 11.3 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):47.451.845.5
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:3.2-5.210.4

 

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Financial News Soft Commodities
15 Feb

Australia’s labor market report is weak. Japan’s GDP unexpectedly contracted

By JustMarkets

At Wednesday’s close of the stock exchange, the Dow Jones Index (US30) rose by 0.40%. The S&P 500 Index (US500) was up 0.96%. The NASDAQ Technology Index (US100) closed positively at 1.30%.

Chicago Fed Chairman Goolsbee stated yesterday that even if inflation is slightly higher for a few months, it would still be consistent with a path back to target. He added that the Fed’s current policy is pretty restrictive and said that he doesn’t support the idea of waiting until inflation hits 2% in 12 months to start cutting interest rates. That raised the odds that the Fed could begin cutting rates this spring. Markets estimate the odds of a 25 bps rate cut at 14% for the March 19-20 FOMC meeting and 46% for the April 30-May 1 meeting.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 0.38%, France’s CAC 40 (FR40) gained 0.68% yesterday, Spain’s IBEX 35 (ES35) declined 0.09%, and the UK’s FTSE 100 (UK100) closed positive 0.75%.

Eurozone industrial production for December unexpectedly rose by 2.6% m/m, beating expectations of 0.2% m/m and the most significant increase in 16 months.

ECB Vice President Guindos said yesterday that it would take some time before the ECB has the necessary information to confirm that inflation is steadily returning to our 2% target. His colleague, ECB Governing Council representative Makhlouf, added that the short-term outlook for the Eurozone economy points to stagnation amid tightening financing conditions, weak business and consumer confidence, and weak foreign demand. Swaps put the odds of an ECB rate cut at 25 bps at 8% at the March 7 meeting and 55% at the April 11 meeting.

Silver gained support on Wednesday after Eurozone industrial production unexpectedly rose rapidly in 16 months, a positive for industrial metals demand. Gold also gained support as an inflation hedge after the US 10-year breakeven inflation rate rose to a 3-week high on Wednesday.

WTI crude futures fell as low as $76 a barrel on Thursday, extending losses from the previous session as official data showed that US oil inventories rose by about 12 million barrels last week, the highest in three months. The latest figure also exceeded market expectations for a 2.56 million barrel rise in inventories and raised demand concerns in the world’s largest oil consumer. Meanwhile, OPEC’s latest report forecasts global oil demand growth in 2024 and 2025, contrasting with more conservative estimates from other sources.

Asian markets traded mixed on Wednesday. Japan’s Nikkei 225 (JP225) was down 0.69% for the day, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to Chinese New Year celebrations, Hong Kong’s Hang Seng (HK50) was up 0.84%, and Australia’s ASX 200 (AU200) ended the day negative 0.74%.

Japan’s economy unexpectedly contracted 0.4% year-on-year in the fourth quarter of 2023, falling short of market forecasts that expected 1.4% growth. It was the first decline in five years amid high inflation and an uncertain global economic outlook.

Traders are looking to add new positions on Chinese indices after Chinese authorities said the country’s holiday season could witness a record 9 billion domestic passenger trips this week. Meanwhile, Beijing has taken a dozen steps since January to cushion the rout in China’s stock market while supporting weak demand in the real estate market amid the lingering real estate crisis.

The Australian dollar held below $0.65 in a weak market reaction as weak employment data reinforced a dovish view of the country’s monetary policy. Australia’s unemployment rate rose to a two-year high of 4.1% in January, and employment increased by just 500, while analysts had expected 30,000 new jobs. The Reserve Bank of Australia is expected to cut interest rates by a total of about 40 basis points this year, with the first move coming in August. Earlier this week, RBA Governor Michele Bullock said inflation didn’t need to slow to 2.5% before the central bank would consider cutting the money rate. However, she emphasized that the central bank remains open to the possibility of a further rate hike in the face of persistent inflation. Expectations for Australian consumer inflation in February 2024 stood at 4.5%, unchanged for the third consecutive month and at its lowest level since January 2022.

S&P 500 (US500) 5,000.62 +47.45 (+0.96%)

Dow Jones (US30) 38,424.27 +151.52 (+0.40%)

DAX (DE40) 16,945.48 +64.65 (+0.38%)

FTSE 100 (UK100) 7,568.40 +56.12 +0.75%)

USD Index 104.71 -0.25 (-0.23%)

News feed for 2024.02.15:
  • – Japan GDP (q/q) at 01:50 (GMT+2);
  • – Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
  • – Japan Industrial Production (m/m) at 06:30 (GMT+2);
  • – UK GDP (q/q) at 09:00 (GMT+2);
  • – UK Industrial Production (m/m) at 09:00 (GMT+2);
  • – UK Trade Balance (m/m) at 09:00 (GMT+2);
  • – Switzerland Producer Price Index (m/m) at 09:30 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 10:00 (GMT+2);
  • – Eurozone Trade Balance at 12:00 (GMT+2);
  • – US Retail Sales (m/m) at 15:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+2);
  • – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+2);
  • – US Industrial Production (m/m) at 16:15 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
  • – New Zealand RBNZ Gov Orr Speaks at 20:40 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
15 Feb

Target Thursdays: USDInd, Bitcoin & XAGUSD hit target prices

By ForexTime 

  • USDInd bulls bags over 350 index points
  • Bitcoin secures 2 out of 4 profit levels
  • Silver eyes 4th and final M15 profit target

Check out these potential profits that you may have missed from our Daily Market Analysis.

  1. USDInd bullish breakout

After struggling for direction in recent days, the USDInd has soared to its highest level in three-months.

  • TP hit: YES, prices blasted through 104.679 – the 161.8 golden Fibonacci ratio.
  • Why: Sticky US inflation data prompted investors to cut back bets on Fed rate cuts.
  • Technicals: Decisive breakout above 104.31 level and D1 channel resistance.

  1. Bitcoin hits fresh 2024 high

Bitcoin has seen spectacular bullish action over the past two weeks, especially after the cryptocurrency surged to a fresh 2024 high!

  • TP hit: YES, 2 out of the 4 profit targets have been hit so far.
  • Why: Positive sentiment towards cryptocurrency amid growing success of bitcoin ETFs.
  • Technicals: H4 Momentum, MACD and 50 LWMA point to further upside.

 

  1. Silver nears 4th profit level

Silver prices kicked off Thursday morning on a positive note with prices breaking through the bullish prices targets on the M15 timeframe.

  • TP hit: YES, 3 out of the 4 profit targets have been hit his morning.
  • Why: The precious metal seems to be drawing strength from a weaker dollar
  • Technicals: Prices bullish on M15 timeframe. Momentum and MACD signal further upside.

The above scenario (XAGUSD) is based on the FXTM Signals that are posted twice a day (before the London and New York sessions) for all FXTM clients to follow.

This can be found in the MyFXTM profile under Trading Services… FXTM Trading Signals.

Forex-Time-LogoArticle by ForexTime

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Financial News Forex and Currency News
14 Feb

Bitcoin bulls ride off weekly support

By ForexTime 

  • Bitcoin bullish on D1/W1 timeframe
  • Strong W1 support at 48412.28
  • Prices firmly above H4 LWMA
  • 4 potential targets on the H4 timeframe
  • Bullish scenario invalidated below 47714.98

Bitcoin has seen spectacular bullish action over the past two weeks.

Prices are firmly bullish on the daily charts with the higher highs and higher lows confirming an uptrend. The upside momentum not only propelled prices towards a weekly resistance level but also triggered a breakout – opening a path beyond the psychological $50,000 level.

Although prices may retest the previous weekly resistance now turned support, demand seems strong and might cause another impulse wave to commence in the current uptrend market structure.

On the 4-hour chart, a strong uptrend is in progress. The price is above the 50 Linear Weighted Moving Average with both the Momentum Oscillators as well as the longer price cycle Moving Average Convergence Divergence (MACD) Oscillators confirming the upward momentum.

If the price reaches the 50425.86 level, a long scenario becomes possible.

Attaching a modified Fibonacci tool to the trigger level at 50425.86 and dragging it to a lower bottom at 47714.98, four conservative targets can be determined:

  • Target 1: 51510.21

  • Target 2: 52052.39

  • Target 3: 53136.74

  • Target 4: 54492.18

If the price breaks past the 47714.98 level, this scenario becomes invalidated.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Cryptocurrencies Financial News
14 Feb

The US inflation report strengthened the US dollar and affected the indices. Switzerland is seeing a sharp decline in inflation

By JustMarkets

US stocks fell sharply on Tuesday after releasing a sharper-than-expected inflation report. At Tuesday’s stock market close, the Dow Jones Index (US30) was down 1.35%. The S&P 500 index (US500) was down 1.37%. The NASDAQ Technology Index (US100) closed negative at 1.80%. In the United States, the annual inflation rate eased to 3.1%, beating expectations of 2.9%, while core inflation came in at 3.9% compared to the forecast of 3.7%. Consumer prices rose by 0.3% from the previous month, and core inflation rose by 0.4%, exceeding expectations. The strong inflation report forced investors to revise their expectations for rate cuts by the Federal Reserve in March and May. All key sectors were down, with real estate and technology leading the way as shares of major technology companies such as Microsoft (2.1%), Amazon (2.1%), and Alphabet (1.6%) fell.

Equity markets in Europe were mostly down on Tuesday. Germany’s DAX (DE40) fell by 0.92%, France’s CAC 40 (FR40) decreased by 0.84% yesterday, Spain’s IBEX 35 (ES35) lost 0.59% on Tuesday, and the UK’s FTSE 100 (UK100) closed negative 0.81%.

The ZEW Economic Sentiment Indicator for Germany rose for the seventh consecutive month to 19.9 in February 2024, reaching its highest level in a year and beating market expectations of 17.5 amid hopes that major central banks will start cutting interest rates this year. In addition, German investor morale improved to a one-year high in February, while the assessment of current economic conditions fell to its lowest level since mid-2020. More than two-thirds of respondents expect the ECB to cut interest rates in the next six months due to lower inflation, while nearly three-quarters of respondents predict the US central bank will cut interest rates soon. Swaps put the odds of a 25 bps ECB rate cut at 7% at the next meeting on March 7 and 52% at the April 11 meeting.

The UK unemployment rate for the fourth quarter of 2023 fell to 3.8% from 4.0%. The UK wages rose more than expected in the year’s final quarter, leading investors to cut bets on a rate cut by the Bank of England this year.

The Swiss franc fell to 0.88 per US dollar in February, its lowest in two months, after lower-than-expected inflation data strengthened the case for doves at the Swiss National Bank (SNB). Swiss consumer prices rose 1.3% year-on-year in January, well below market expectations of 1.7% and the lowest in two years, remaining below the SNB’s upper 2% target for the seventh consecutive month. Inflation fell despite repeated calls for stubbornly higher rates as the country scraped electricity subsidies and revised the value-added tax. In turn, this result has raised bets that the SNB may start to cut its benchmark discount rate in the first half of the year, including the possibility of a March cut. The franc was also pressured because the SNB increased its foreign exchange reserves for the second month in a row.

WTI crude oil prices rose to 78 dollars per barrel on Tuesday, hitting a two-week high, as tensions in the Middle East continued to support oil prices. Meanwhile, OPEC maintained its forecasts for sustained growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for those years, pointing to additional growth potential. In addition, the report noted a 350,000 bpd reduction in OPEC oil production in January following the implementation of a new round of voluntary production cuts by the OPEC+ alliance in the first quarter.

The US natural gas prices fell more than 5.5% to below $1.7/MMBtu, hitting their lowest since July 2020 due to rising production and weak demand. Gas wells pushed production to near-record levels after a sharp cold snap in mid-January.

Asian markets were mostly up on Tuesday. Japan’s Nikkei 225 (JP225) was up 2.89% for the day, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to Chinese New Year celebrations, Hong Kong’s Hang Seng (HK50) was also not trading yesterday, and Australia’s ASX 200 (AU200) ended the day negative 0.15% on the day.

The sharp fall in the Japanese yen yesterday prompted Japan’s Finance Minister Shun’ichi Suzuki to warn that authorities were closely monitoring the market without confirming whether they would intervene again. Deputy Finance Minister for International Affairs Masato Kanda also said that Japan would take appropriate action in the foreign exchange market if necessary, as the sharp fall of the yen is not suitable for the economy. The country intervened in the foreign exchange market three times in 2022 when the yen fell to a 32-year low of 152 per dollar but has taken no further action since then.

S&P 500 (US500) 4,953.17 −68.67 (−1.37%)

Dow Jones (US30) 38,272.75 −524.63 (−1.35%)

DAX (DE40) 16,880.83 −156.52 (−0.92%)

FTSE 100 (UK100) 7,512.28 −61.41 (−0.81%)

USD Index 104.85 +0.68 (+0.65%)

News feed for 2024.02.14:
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+2);
  • – UK Producer Price Index (m/m) at 09:00 (GMT+2);
  • – Eurozone GDP (q/q) at 12:00 (GMT+2);
  • – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
  • – UK BoE Gov Bailey Speaks at 17:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
13 Feb

Ahead of the US CPI report, investors are liquidating long positions in equities

By JustMarkets 

At Monday’s stock market close, the Dow Jones (US30) index was up 0.33% and set a new all-time high. The S&P 500 index (US500) was down 0.10%. The NASDAQ Technology Index (US100) closed negative 0.30%. Ahead of the monthly US consumer price report, equities were pressured by long-position liquidation.

Fed Chair Bowman’s hawkish comments on Tuesday also weighed on stocks when she stated that current interest rates are in a good place to maintain downward pressure on inflation and that she does not believe a Fed rate cut is appropriate in the near term.

Today, the US will release its consumer inflation (CPI) report. On an annualized basis, overall inflation is expected to fall from 3.4% to 3.1%. Core inflation (which excludes food and energy prices) is forecast to fall from 3.9% to 3.7% y/y. If progress with inflation continues, this will put pressure on the dollar index but will also have a favorable impact on stock indices and the precious metals market (gold and silver). Suppose progress in the fight against inflation stalls or develops less favorably than expected. In that case, the US Treasury yields will likely jump as traders abandon bets on the sharp rate cuts scheduled for this year and push back the expected start date of the Fed’s easing cycle. Such an outcome would have to be favorable for the US dollar soon and hurt risk assets (euro, British pound, stock indices, and gold).

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) rose 0.65%, France’s CAC 40 (FR 40) gained 0.55% yesterday, Spain’s IBEX 35 (ES35) jumped 0.89% on Monday, and the UK’s FTSE 100 (UK100) closed positive 0.02%.

The European Central Bank does not need to weaken the eurozone economy further to bring inflation under control as demand is still weak, ECB board spokesman Piero Cipollone said on Monday. These comments contrast with other more hawkish remarks from ECB officials. Currently, swaps are priced at a 25 bps chance of an ECB rate cut of 11% at the next meeting on March 7 and 60% at the April 11 meeting.

WTI crude futures hit around $77 a barrel on Tuesday, near their highest levels in two weeks, as heightened geopolitical tensions in the Middle East continue to support oil prices. On Monday, Israel launched airstrikes on the southern Gaza city of Rafah after Israeli Prime Minister Benjamin Netanyahu rejected a ceasefire offer from Hamas. However, diplomatic talks in Beirut indicate possible progress in reducing tensions between Israel and Hamas. Meanwhile, uncertainty on the demand side could limit oil price gains as inflation risks could delay interest rate cuts by the Federal Reserve.

Most markets in the Asia-Pacific region, including China, Hong Kong, Japan, South Korea, and Singapore, were closed for holidays. Australia’s ASX 200 (AU200) ended the day positively, 0.06%.

Inflation expectations in New Zealand reached the lowest level in 2 years at 2.5% in the first quarter of 2024. But overall sentiment remained unfavorable after RBNZ Governor Adrian Orr told a parliamentary committee on Monday that the current inflation rate of 4.7% is still too high and money rates should stay at restrictive levels. The statement came amid the central bank’s preparations for its first policy meeting of the year in late February.

The NAB Australia Business Confidence Index rose to 1 in January 2024 from an upwardly revised zero in the previous month but remained below its long-term average. The improvement in the index was mainly in manufacturing and construction, while sentiment in wholesale and retail trade declined. The Westpac-Melbourne Institute of Australia’s consumer sentiment index jumped 6.2% to 86 in February 2024 from 81 in January, the highest in 20 months, amid lower inflation and optimism that the Reserve Bank of Australia has ended its tightening campaign.

S&P 500 (US500) 5,021.84 −4.77 (−0.10%)

Dow Jones (US30) 38,797.38 +125.69 (+0.33%)

DAX (DE40)  17,037.35 +110.85 (+0.65%)

FTSE 100 (UK100) 7,573.69 +1.11 (+0.02%)

USD Index  104.13 +0.05 (+0.05%)

News feed for 2024.02.13:
  • – Japan Producer Price Index (m/m) at 01:50 (GMT+2);
  • – New Zealand Inflation Expectations (m/m) at 04:00 (GMT+2);
  • – UK Average Earnings Index (m/m) at 09:00 (GMT+2);
  • – UK Claimant Count Change (m/m) at 09:00 (GMT+2);
  • – UK Unemployment Rate (m/m) at 09:00 (GMT+2);
  • – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
  • – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – US Consumer Price Index (m/m) at 15:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
13 Feb

USDInd: Braces for breakout ahead of CPI

By ForexTime 

  • USDInd waits for fundamental spark
  • Watch out for US inflation report
  • Descending channel on H4 charts
  • Key levels of interest at 104.31 & 104.00
  • Possible breakout on horizon

After struggling for direction over the last few days, the USDInd could be injected with fresh volatility due to the incoming US inflation report.

The Consumer Price Index (CPI) measures the average change in the prices of a basket of goods and services over a period.

Given how today’s CPI data has the potential to influence expectations around when the Federal Reserve will start cutting interest rates in 2024, it will most likely move the USDInd.

Markets are expecting US inflation to slow to 2.9% from 3.4% on an annual basis while the core which strips out volatile food and energy prices is expected to cool 3.7% compared to 3.9%.

Ultimately, further signs of cooling inflation may fuel Fed cut bets, weakening the dollar as a result.

As of writing, traders are pricing in a 70% probability of a 25 basis point US rate rate cut in May.

These odds may be influenced by the incoming inflation report along with other key US data this week.

Note: USDInd tracks how the US dollar performs against a basket of its G10 peers including EUR, GBP, JPY, and others.

Technically Speaking

USDInd, on the daily timeframe is in an upward sloping channel which began on December 28 2023.

In addition, the last 6 days of trading have seen it move in a sideways range of about 718points.

At the time of writing, there is potentially, about 260 point move to test the sideways ranges resistance at 104.512.

On the 4-hour time frame however, the index is in a descending triangle and testing this patterns resistance at the time of writing.

According to Thomas Bulkowski, in his book “The Encyclopedia of Chart Patterns”

A descending triangle in a bullish market:

  • Is an intermediate-term bullish continuation pattern.
  • Rises 38% on average.
  • Meets its price target 64% of the time.

An upward breakout of the descending triangle (a more likely scenario with a hotter than expected CPI data), may lead to a test of the following levels.

  • 104.512: – The channel resistance on the daily time frame

  • 104.679: – The 161.8 golden Fibonacci ratio

On the other hand, a downward breakout of the descending triangle (a more likely scenario with a cooler than expected CPI data), may lead to the test of the following levels.

  • 103.917: – The sideways channels support on D1

  • 103.710: – The 21-day Exponential Moving Average (EMA)

  • 103.524: – The 50-day Exponential Moving Average

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News
12 Feb

Brent Crude Prices Edge Higher Amid Middle East Tensions

By RoboForex Analytical Department

Brent crude oil prices are currently hovering around $82.00 per barrel this Monday, with market sentiment influenced by recent developments in the Middle East. Although concerns over disruptions to energy supplies from the region have somewhat subsided, the possibility of supply disturbances continues to support oil prices.

The rejection of a ceasefire offer by Israel from Hamas last week led to a near 6% increase in oil prices, as the market remains sensitive to geopolitical tensions that could impact oil supply.

It’s anticipated that trading activity in the oil market may be subdued this week due to holidays in much of the Asia-Pacific region, including China, Hong Kong, South Korea, Taiwan, and Japan.

Brent Technical Analysis

The H4 chart analysis for Brent indicates the formation of a new growth wave, with a recent structure completion at $82.12. The market is now forming a consolidation range below this level, and a correction down to $79.10 is not out of the question. Following this correction, a new upward trajectory towards $84.20 is expected, potentially extending to $86.68. The MACD indicator supports this view, with the signal line at the highs and anticipated to cycle back towards zero.

On the H1 Brent chart, a consolidation phase is observed under $82.12. A downward escape could lead to a correction towards $79.10, followed by an expected growth wave to $82.20. An upward breakout could set the stage for a movement towards $84.20. The Stochastic Oscillator, with its signal line above 50 and targeting 80, corroborates this growth potential.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
12 Feb

Geopolitical risks in the Middle East support crude oil prices. RBNZ intends to raise rates further

By JustMarkets 

As of Friday’s stock market close, the Dow Jones Index (US30) was down 0.14% (0.32% for the week). The S&P 500 Index (US500) decreased by 0.57% (1.40% weekly). The NASDAQ Technology Index (US100) closed positively at 1.25% (2.41% for the week). Economic optimism rallied shares of chip, cybersecurity, and software makers, leading higher technology stocks. According to Bloomberg Intelligence, about 80% of S&P 500 companies reporting results this cycle beat forecasts well above the 10-year average of 74%.

The US Bureau of Labor Statistics left the core US Consumer Price Index for Q4 unchanged at an annualized rate of 3.3%. Fed comments on Friday were a bit hawkish and supported the dollar at the end of the trading day. Dallas Fed President Logan said she sees no need for additional interest rate adjustments at this time and is confident that the progress being made in inflation will be sustainable over the medium term. Atlanta FRB President Bostic also said that the Fed must “stay the course” to ensure inflation returns to the 2% target. Markets rate the odds of a 25 bps rate cut at 19% for the March 19-20 FOMC meeting and 73% for the next meeting on April 30-May 1.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) was down 0.22% (0.00% change for the week), France’s CAC 40 (FR 40) fell by 0.24% on Friday (down 0.73% week-on-week), Spain’s IBEX 35 (ES35) lost 0.09% on Friday (down 1.50% week-on-week), and the UK’s FTSE 100 (UK100) closed negative 0.30% (down 0.56% week-on-week).

On Friday, ECB Governing Council spokesman Kazaks said that there are now expectations that the ECB may cut interest rates in the spring at its March or April meetings, but that one should not be overly optimistic. Croatian central bank governor Boris Vujcic said there was no rush to cut record-high borrowing costs and that it was better to wait and see if inflation was decisively beaten. Many more ECB chiefs will be in front of the microphone in the coming days. The euro can probably count on additional support if they repeat this statement. Swaps currently estimate the odds of a 25 bps ECB rate cut at 9% at the next meeting on March 7 and 53% at the next meeting on April 11.

Oil prices will remain volatile in the coming days after rising on Friday, up 6% for the week. Bullish for oil prices were comments by Israeli Prime Minister Netanyahu on Thursday when he said Israel could achieve total victory over Hamas within months and rejected any ceasefire talks. A continuation of the war threatens to escalate and widen the conflict across the Middle East, a region that accounts for about a third of global oil production. In addition, Friday’s rally in the S&P 500 Index to a record high showed confidence in the economic outlook, which positively impacted energy demand and crude oil prices.

Asian markets traded mostly higher last week. Japan’s Nikkei 225 (JP225) gained 1.31% for the week, China’s FTSE China A50 (CHA50) jumped by 4.47%, Hong Kong’s Hang Seng (HK50) ended the week up 2.67%, and Australia’s ASX 200 (AU200) ended the week negative 0.71%.

Financial conditions in Japan will remain easy for now even after the Bank of Japan ends its negative rate regime, Bank Governor Kazuo Ueda said late last week. Ueda’s comments were the latest statement from Bank officials, who assured market participants that any end to negative rates would not herald a change in the Bank’s core policy. The International Monetary Fund has supported the BoJ’s cautious approach, recommending gradual rate hikes once inflation becomes sustainable. These dovish statements suggest that the BoJ’s exit from its ultra-low stance is unlikely to result in multiple rate hikes, as has been seen recently in other key economies, but rather limited to a few scattered increases. In theory, this could limit the yen’s recovery potential in the coming months, making it less attractive in yield differentials than its major peers.

The New Zealand dollar continues to rise as currency markets assess further interest rate hikes by the Reserve Bank of New Zealand following last week’s strong labor market data. According to money market pricing, investors now believe there is a 90% chance of a further 25 basis point interest rate hike by May. Markets have postponed the first RBNZ rate cut until November. The RBNZ will, therefore, be one of the last major central banks to cut rates, which will support the New Zealand dollar.

S&P 500 (US500) 5,026.61 +28.70 (+0.57%)

Dow Jones (US30) 38,671.69 −54.64 (-0.14%)

DAX (DE40)  16,926.50 −37.33 (-0.22%)

FTSE 100 (UK100) 7,572.58 −22.90 (-0.30%)

USD Index  104.08 −0.09 (-0.08%)

News feed for 2024.02.12:
  • – New Zealand RBNZ Gov Orr Speaks at 02:30 (GMT+2);
  • – Indian Consumer Price Index (m/m) at 14:00 (GMT+2);
  • – US FOMC Member Bowman Speaks at 16:20 (GMT+2);
  • – US FOMC Member Kashkari Speaks at 20:00 (GMT+2);
  • – UK BoE Gov Bailey Speaks at 20:00 (GMT+2).

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
12 Feb

How are Oil Prices Impact by Wars, and What Can We Expect in 2024

War can impact oil prices significantly, especially if one of the oil production companies is participating in such a war. Production and refining are critical elements of an oil infrastructure; those assets could be destroyed or slowed due to war activity. War can halt supply routes. For example, in the current Middle East war, Huti rebels are attacking merchant ships that are carrying oil, which has forced companies to take a different route away from the Suez Canal and around the tip of South Africa. Oil prices can increase or decrease during geopolitical unrest if there is concern that a war will reduce energy demand.

Supply Disruptions

Wars can disrupt oil production and supply, particularly in major oil-producing regions or countries, and impact crude oil investing. Infrastructure, refineries, pipelines, and other oil facilities may become targets or collateral damage, leading to supply disruptions. This reduced supply can put upward pressure on oil prices.

A supply disruption refers to an event or circumstance that interrupts or hinders the normal flow of goods or services from the suppliers to the consumers. It occurs when a sudden and unforeseen interruption occurs in a particular product or resource’s production, distribution, or availability.

Political conflicts, wars, sanctions, or trade disputes can disrupt the supply of commodities by affecting the production, transportation, or export/import channels.

Natural disasters such as hurricanes, earthquakes, floods, or wildfires can damage infrastructure, disrupt production facilities, or impact transportation networks, leading to supply disruptions.Technical failures, accidents, or operational issues in production facilities, refineries, pipelines, or other supply chain components can interrupt the normal supply flow.

Labor disputes, strikes, or protests by workers in the industry can disrupt operations, leading to reduced production and constrained supply. Regulation changes, compliance requirements, or government policies can impact the supply chain and production, causing disruptions.

When a supply disruption occurs, it often decreases the availability of the affected product or resource. Subsequently, it can result in price increases or price volatility. The severity and duration of the disruption can vary, ranging from temporary disruptions resolved quickly to prolonged and significant disruptions that have broader implications on markets and economies.

Geopolitical Risk

Wars or conflicts can create geopolitical unrest and uncertainty, contributing to volatility in oil markets. Investors and market participants may anticipate potential supply disruptions or geopolitical risks, leading to speculative buying or selling of oil futures and affecting prices.

Volatility in the oil markets refers to the degree of price fluctuation or variation in oil prices over a certain period. It measures the extent to which the price of oil, or oil-related financial instruments, changes within a specific timeframe. High volatility suggests that oil prices are experiencing significant and rapid changes in value, while low volatility indicates relatively stable and predictable price movements. Various factors, such as supply and demand dynamics, geopolitical events, economic indicators, and market sentiment, can contribute to volatility in the oil markets.

Alter Sentiment

Wars create a sense of heightened risk and uncertainty among market participants. This situation can impact investor sentiment, leading to changes in oil prices. In times of conflict, investors may opt for safe-haven assets or reduce their exposure to potential risk, which can affect the demand and price of oil.

Market sentiment refers to the overall attitude or feeling of investors or traders towards a particular financial market or asset. It represents the collective psychology and emotions influencing market participants’ decision-making processes. Market sentiment can be categorized as bullish (optimistic), bearish (pessimistic), or neutral (lacking a clear bias).

Various factors influence market sentiment, including economic indicators, geopolitical events, news releases, corporate earnings announcements, and investor behavior. Positive market sentiment often leads to increased buying activity, rising prices, and an optimistic outlook. Conversely, negative market sentiment can result in selling pressure, declining prices, and a pessimistic outlook.

Sentiment plays a crucial role in the oil markets as it influences the behavior and decisions of market participants, including traders, investors, producers, and consumers. Positive sentiment can drive increased demand for oil and result in higher prices. For example, optimism about global economic growth could lead to expectations of increased oil consumption, pushing oil prices upward.

Measuring market sentiment is subjective and relies on various tools and indicators. Traders and analysts use surveys, sentiment indices, options market analysis, social media sentiment analysis, and technical analysis to gauge market sentiment. Considering market sentiment can help traders and investors assess the broader market environment and make informed decisions about buying or selling assets.

Demand Destruction

Wars can lead to economic disruptions, such as reduced trade, decreased consumer spending, and business contraction. This scenario has the potential to reduce oil demand, impacting prices. Additionally, wars can result in population displacement, economic instability, and infrastructure destruction, further contributing to lower oil demand.

Demand destruction in the oil industry can significantly affect oil prices, as a decrease in demand can lead to oversupply and downward pressure on prices. Oil producers and market participants closely monitor factors influencing demand to assess potential demand destruction and adjust their production levels and strategies accordingly.

Shifts in consumer preferences, lifestyle changes, or technological advancements can result in declining demand for specific products. For example, a growing focus on renewable energy and electric vehicles may reduce the demand for fossil fuels.

Significant price hikes can deter consumers from purchasing or using a particular product in large quantities. This decline in demand due to higher prices can be considered demand destruction. The availability of substitutes or alternative products can significantly impact demand. If consumers find cheaper or more efficient options, the demand for a specific product may decrease, leading to demand destruction.

How Does War Impact Oil Refining

Refining needs drive oil demand. Oil refining is a complex and capital-intensive industry, with refineries investing in advanced technologies and equipment to improve efficiency, product quality, and environmental performance. Refineries play a critical role in meeting society’s energy needs by converting crude oil into a wide range of valuable petroleum products that drive transportation, heating, and industrial processes.

Crude oil is heated in a distillation column. After treatment, the different refined products are blended in specific proportions to meet desired specifications and optimize performance. Blending can involve the addition of additives and chemicals to enhance product properties and meet regulatory standards.

The refined products are then transported and distributed via pipelines, tankers, trucks, or rail to various markets and end-users, such as gas stations, airports, industries, and residential consumers.

A war in a region that is a significant producer or exporter of crude oil can lead to disruptions in oil supply to refineries. This can result in decreased feedstock for refining operations, potentially leading to reduced production or even temporary shutdowns of refineries.

In the event of military conflict, refining infrastructure, such as refineries, pipelines, storage facilities, and transportation infrastructure, may become targets or collateral damage. Attacks on critical infrastructure can severely disrupt refining operations, leading to reduced capacity or complete shutdowns.

Refineries in or near conflict zones may face security risks, making it difficult to operate at full capacity. Concerns about personnel safety, potential attacks, or damage to infrastructure can hamper refining operations.

Spillover Effect

Even if a war does not directly involve major oil-producing regions, geopolitical tensions can spill over and impact neighboring countries or regions. Any perceived threat to oil supplies or transportation routes can affect market sentiment and oil prices.

What Might Happen in 2024

Wars are occurring on two fronts. Russia and Ukraine continue to fight, and there does not seem to be an end in sight. The Middle East war is creating supply chain disruptions in the Red Sea and the Suez Canal, creating an uptick in shipping costs. The Energy Information Administration believes global crude oil production will decelerate in 2024, rising by 0.6 million barrels daily, down from 1.7 million barrels a day of growth in 2023. The focus is mainly on OPEC+ and their need to cut production to increase prices.

The Bottom Line

The upshot is that wars can significantly affect oil prices due to the potential disruptions they can cause in the global oil supply chain. Wars in major oil-producing regions can disrupt the production and distribution of crude oil. Conflict-related damage to infrastructure, attacks on oil fields or installations, or blockades of shipping routes can lead to a decrease in oil supply. Reduced supply relative to demand can drive up oil prices.

Armed conflicts can create geopolitical tensions that affect oil markets. The uncertainty and risk associated with wars or the threat of escalation can lead to market speculation and increased price volatility. Expecting potential supply disruptions can drive up prices even before actual disruptions occur.Wars can have broader economic consequences, such as slowing global growth, increased inflation, or trade disruptions. These factors can impact oil demand, which, in turn, affects oil prices. Economic downturns resulting from wars can lead to decreased oil demand and downward price pressure.

By Taylor Wilman

Energy Financial News
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