The settlement price of international crude oil futures has risen by nearly 2%, with a cumulative decline of over 4% this week. Crude oil rose with the stock market on Friday, but still fell for the third consecutive week as concerns about global demand intensified and the risk premium of the Israeli-Palestinian conflict subsided. At the same time, Iraq expressed support for OPEC+'s oil production reduction before the meeting two weeks later, and some speculators made up a large number of short positions before the weekend uncertainty. WTI steadily climbed for most of Friday, closing above $77 per barrel, up 1.9%. Concerns about weakened demand and increased supply are driving the long-term downward trend of oil prices. Nevertheless, the price ended with a weekly 4% decline, marking the third consecutive week of decline.
WTI's December crude oil futures closed up $1.43, or 1.89%, at $77.17 per barrel, down 4.15% this week.
Brent crude oil futures for January ended up 1.42 US dollars per barrel, or 1.77%, at 81.43 US dollars per barrel, down 4.08% this week.
Market News Analysis
Brent crude oil and West Texas Intermediate crude oil have fallen for the first consecutive three weeks since May, despite both benchmark indices exiting the technical oversold zone.
Price Futures Group analyst Phil Flynn said, "This is a perfect technical storm. This week our short positions almost reached historic highs, and now we are seeing some short covering entering the weekend
Flynn pointed out that in addition to Iraq's comments, Saudi Arabia and Russia also confirmed this week that they will continue to reduce oil production until the end of the year.
In terms of crude oil supply, energy service company Baker Hughes stated that in the United States, energy companies are connected to?? Reduce the number of oil drilling platforms in operation to the lowest level since January 2022 for the second week. The number of drilling rigs points towards future production.
Analysts at Commercial Bank of Germany (ETR: CBKG) stated that "concerns about demand have replaced concerns about production disruptions caused by the Middle East conflict
OPEC+, the Organization of Petroleum Exporting Countries, and their allies, including Russia, will hold a meeting on November 26th. The Iraqi Ministry of Oil stated that Baghdad is committed to complying with the OPEC+agreement to determine production levels.
Helima Croft, a capital markets analyst at Royal Bank of Canada (TSX: RY), said that given new concerns about multinational demand and broader macro prospects, the possibility of Saudi Arabia extending its production reduction deadline to the first quarter of 2024 is definitely increasing.
Macro analysts at Kai Tou have stated that if oil prices continue to decline, OPEC+may further reduce supply. The research company stated in its report: "We adhere to our forecast of Brent crude oil prices closing at around $85 per barrel this year and next year
Long term inflation expectations for US consumers have risen to a 12 year high. The long-term inflation expectations of American consumers rose to their highest level since 2011 in early November, while high interest rates and concerns about the economic outlook dampened public confidence. The initial November index of the University of Michigan shows that consumers expect prices to rise at an annual rate of 3.2% over the next 5 to 10 years, higher than the 3% predicted a month ago. The data released on Friday also indicates that they expect costs to increase by 4.4% in the coming year, compared to 4.2% in the previous month. The increase in inflation expectations. The expected one-year inflation rate has slightly increased to 4.4%, indicating that the significant increase between September's 3.2% inflation rate and October's 4.2% inflation rate is not accidental. The current data is the highest level since November 2022, still far above the range of 2.3% -3.0% in the two years before the epidemic. Long term inflation expectations have also increased, rising from 3.0% last month to 3.2% this month, the highest level since 2011. In both the short and long term, inflation expectations have risen to their highest levels this year.
Recently, Mohamed El Erian, Allianz's chief economic advisor, stated that although the US economy will soon see a significant drop in prices, inflation will not return to the Fed's 2% target soon. "I believe the core inflation rate will be around 3% in the coming years," he said. Erian said that Wall Street is more optimistic about the economic outlook, and large companies such as Goldman Sachs have recently predicted a significant "de inflation" in 2024, and the likelihood of an economic recession is not very high.
A survey on Friday showed that US consumer confidence fell for the fourth consecutive month in November, and household inflation expectations rose again. Their medium-term expectations for price pressures rose to their highest level in more than a decade. The consumer confidence index has declined for the fourth consecutive month, with a 5% decline in November. Although the current and expected personal financial situation has slightly improved this month, the long-term economic outlook has declined by 12%, partly due to increasing concerns about the negative impact of high interest rates. The ongoing conflict between Gaza and Ukraine has also brought pressure to many consumers. Overall, the confidence of low-income consumers and young consumers has decreased the most.
San Francisco Federal Reserve Chairman Mary Daley stated that she is not yet ready to disclose whether the Federal Reserve has completed raising interest rates, which echoes the remarks of Federal Reserve Chairman Jerome Powell on Thursday. Higher interest rates can reduce oil demand by slowing down economic growth.
Risk spillovers in overseas markets have led to negative weekly returns for crude oil and gold themed funds. Since the beginning of this week, the leading commodities in the overseas commodity market (such as crude oil and gold) have started to decline, and under the linkage between internal and external markets, the performance of commodity themed funds investing in domestic and foreign markets has also been poor. According to Wind Information data, the shares and returns of 31 gold themed funds and 26 crude oil themed funds all showed a downward trend this week, with crude oil themed funds performing more significantly, with weekly returns significantly lower than gold themed products. An analyst said that due to the relatively bearish fundamentals of overseas markets this week, international commodities are generally under pressure, with safe haven assets starting to decline. Under the risk spillover of overseas markets, internal commodity assets also fluctuate, and the performance of commodity funds targeting domestic and foreign market assets is also affected.
According to data from the Intercontinental Exchange (ICE), in the week of November 7th, the net long position of ICE Brent crude oil held by monetary funds decreased by 24245 contracts to 176038 contracts, setting a new low in the past four weeks. The net long position in white sugar increased to 27897 contracts, reaching a seven week high.
Next week's economic data
The upcoming US inflation data, speeches by Federal Reserve officials, and the threat of a US government shutdown may further affect the futures market next week.
Monday, November 13th
Japan: Japan Producer Price Index (PPI)
UK: Speech by British Prime Minister Rishi Sunak
Tuesday, November 14th
New Zealand: New Zealand Food Prices
Eurozone: Germany ZEW Survey Expectations
UK: Number of initial claims for unemployment benefits, delivered by Huw Pill, Chief Economist of the Bank of England
United States: October CPI of the United States, speeches by Vice Chairman of the Federal Reserve, Philip Jefferson, and Chairman of the Chicago Fed, Goolsby
Wednesday, November 15th
China: Retail sales and industrial production in China
Japan: Gross Domestic Product, Industrial Production
Eurozone: EU Autumn Economic Forecast
UK: UK Consumer Price Index
United States: Retail sales, corporate inventory, PPI, Imperial manufacturing in the United States
Thursday, November 16th
Australia: Unemployment in Australia
Japan: Japan's tertiary industry index, core machine orders, trade
United States: Initial Unemployment Claims, Industrial Production, Federal Reserve Speech
Friday, November 17th
Eurozone: Speech by Christina Lagarde, President of the European Central Bank
UK: Speech by Dave Ramsden, Deputy Governor of the Bank of England
USD: Federal Reserve Speech - Chicago Fed Chairman Goolsby, Boston Fed Chairman Susan, San Francisco Fed Chairman Daley
