Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
AKCJA
After months of panic over global crude supplies, the surge in oil prices is now violently reversing, causing all benchmarks to plummet down to the $70 range. At the time of writing, Brent Crude has fallen to $78 per barrel, while West Texas Intermediate has dropped to just $75. Perhaps more interestingly, the Dubai and Murban benchmarks, used to price regional futures contracts in the Middle East, are now in contango until the end of the year, meaning longer-dated contracts are being priced higher than shorter-dated ones. This is the opposite of the backwardation structure observed over the past few months, whereby prompt crude oil prices faced a premium due to the immediate scarcity threat caused by shipping disruptions. The structural flip marks a return to the pre-conflict state of affairs and is a strong signal that at least as far as oil markets are concerned, the Iran war is over. The reopening of the Strait of Hormuz would immediately free up crude oil supplies currently stuck in a number of Gulf states, particularly Iraq, which would reduce the reliance on strategic petroleum reserves, which have faced heavy draws in recent months.
While the peace deal has yet to be signed, or even finalised for that matter, financial markets at large have been emboldened by recent comments from Iran and the White House alike. On Tuesday, the Dow Jones Industrial Average topped 52,000 points for the first time in its history, maintaining the momentum from the prior session. The S&P 500 and Nasdaq meanwhile both closed in the red as an acute selloff in the tech sector caused heavy losses for Micron (MU), Sandisk (SNDK) and Advanced Micro Devices (AMD). Despite the rout in tech, recently launched SpaceX (SPCX) managed to close in the green for the third day running yesterday, granting the company a greater market cap than Amazon (AMZN) and placing it among the top five largest companies in the United States. US futures are up slightly going into today’s session, while in Japan the Nikkei 225 is currently enjoying a tussle with the 70,000-point milestone.
Later today, all eyes will be on the FOMC meeting, chaired by the newly appointed Kevin Warsh. While markets are fully anticipating another rate hold, analysts will be on the lookout for any hints regarding future decisions and for any language pertaining to inflation. The Federal Reserve will also release the latest “dot plot”, indicating where each individual official believes interest rates will lie at the end of the year and into the next. One notable dot may be missing however, that of Kevin Warsh himself, who has previously expressed dislike for the practice and for forward guidance in general. On Tuesday, the Bank of Japan raised rates on the yen to a 31-year high of 1% in a near-unanimous vote, in what is viewed as a response to creeping inflationary pressures within the island nation. Falling oil prices have not yet had time to infiltrate global market dynamics, making the outlook on producer and consumer prices hard to gauge and putting central banks around the world in a difficult spot. Many monetary officials around the world will be silently hoping for a swift end to the Iran chapter; whether or not they get their wish is another matter.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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OTWÓRZ KONTO