Crude oil trading reminder: Sticky inflation hits US interest rate cuts hopes, oil prices weaken slightly, pay attention to the IEA monthly report and the geographical situation

FX678 Finance ·  Apr 11 20:41

During the Asian session on Friday (April 12), U.S. crude oil fluctuated slightly and is currently trading around $85.41 per share. Oil prices closed down slightly on Thursday. Inflation stickiness dampened hopes that the US would cut interest rates recently, but concerns about Iran's possible attack on Israeli targets kept crude oil prices close to a six-month high, and OPEC believes summer demand will be quite strong.

Brent crude futures closed down $0.74, or 0.8%, at a settlement price of $89.74 per barrel; U.S. crude futures closed down $1.19, or 1.4%, on Thursday, at a settlement price of $85.02.

(Continuous daily chart of U.S. crude oil futures, source: Easy Huitong)

Vikas Dwivedi, a global energy strategist at Macquarie, said that without actual supply disruptions related to geopolitical events, it would be difficult for Brent crude to stay above $90 per barrel in the second half of the year.

“As a result, we expect oil to turn bearish for the rest of the year, given the increase in supply from the Organization of Non-Petroleum Exporting Countries (OPEC), the re-entry of large amounts of idle OPEC+ production capacity into the market, and continued inflation which may weaken demand.”

The minutes of the Federal Reserve's meeting show that officials are concerned that progress on inflation may have stalled and that it will take longer to maintain a tight monetary policy.

After consumer inflation data was higher than expected for the third time in a row, investors who originally expected to cut interest rates in June now think September is more likely.

The ECB kept borrowing costs at a record high as expected on Thursday, but at the same time hinted that interest rates might be cut soon.

The slowing pace of interest rate cuts may curb oil demand, but OPEC is sticking to its forecast of relatively strong global demand growth in 2024.

The Organization of Petroleum Exporting Countries (OPEC) predicted on Thursday that summer fuel consumption will be very strong, and insisted on predicting a relatively strong increase in global oil demand in 2024. At the same time, the world economy may perform better than expected this year.

OPEC said in its monthly report that world oil demand will increase by 2.25 million b/d in 2024 and 1.85 million b/d in 2025. Both forecasts are the same as last month.

Economic growth is likely to give oil prices additional upward momentum. Oil prices have risen by more than 90 US dollars per barrel this year due to tightening supply and the war in the Middle East region. OPEC and its allies (OPEC+) agreed last week to maintain production cuts until the end of June.

OPEC stated in the report that “despite some downside risks, if the growth momentum at the beginning of the year continues, this may bring further upward momentum to global economic growth in 2024.”

OPEC+ will meet in June to decide whether to further extend production cuts or restore partial supply to the market.

The OPEC monthly report said, “In the face of continuing uncertainty, the strong outlook for oil demand in summer is worth carefully monitoring the market to ensure a healthy and sustainable market balance.”

The OPEC report also said that although OPEC+ member countries began a new round of voluntary production cuts in January, OPEC oil production remained stable in March, increasing by 3,000 b/d to 26.6 million b/d.

The International Energy Agency (IEA) will publish its forecast in its monthly report on Friday, and investors need to focus their attention.

The power outage on Wednesday also put pressure on oil prices. The power outage shut down several of Motiva's fuel production facilities in Port Arthur, Texas, affecting production capacity as much as 626,600 b/d.

People familiar with the plant's operations said Motiva began restarting its fluidized catalytic cracking unit (FCC) to produce gasoline on Thursday morning.

Of course, investors also need to focus on news related to the geographical situation in the Middle East.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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