Turbulent oil steals today’s drama
Rumors and panic spread following WSJ’s report that OPEC+ might increase production after the December 4th meeting. Both the New York-traded West Texas Intermediate crude, or WTI, the benchmark for U.S. crude, and the London-traded Brent, the global gauge for oil, hit their lowest levels since the start of the year in Monday’s early trading. Abdulaziz, the Saudi Energy Minister, answered right away:
“It is well-known that OPEC+ does not discuss any decisions ahead of the meeting.”
Russian Deputy Prime Minister Alexander Novak, Abdulaziz’s closest non-Gulf ally in OPEC+, came in with his own responses regarding the December 5th prospective import ban and price cap on Russian oil.
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Novak reiterated Russia’s stand of not selling its oil to nations that would participate in the price-cap, a plan devised by the West to limit the funding that Moscow could put in its war against Ukraine. The Russian deputy premier also said in the event of an oil price cap, Russia may also reduce oil production.
WTI, which on Monday reached a session low of $75.30, the lowest price since January, began to recover most of its losses by lunchtime in response to Abdulaziz and Novak’s comments. The benchmark price for U.S. crude fell 35 cents, or 0.4%, to close at $79.73 a barrel. Prior to recovering to close at $87.45, down 17 cents, or 0.2% for the day, global benchmark Brent crude fell to $82.36 earlier, its lowest level since February.
All eyes are on what the OPEC+ alliance of oil producers will do when it meets on December 4th. At the most recent OPEC+ meeting, a decision to cut output by 2 million barrels per day was made in an effort to support Brent and U.S. crude prices, which had fallen precipitously from their March highs.
Wall Street in the red with concerning China COVID report
The major Wall Street indices closed Monday slightly down due to concerns that China would resume more stringent COVID-19 control measures now that it has acknowledged facing the pandemic’s most challenging challenge. Beijing announced on Monday that it will close businesses and schools in severely affected areas and tighten entry regulations as infection rates continued to rise.
The Nasdaq Composite sank 121.55 points, or 1.09%, to 11,024.51, the S&P 500 lost 15.4 points, or 0.39%, to 3,949.94, and the Dow Jones Industrial Average dropped 45.41 points, or 0.13%, to 33,700.28. Volatility may rise due to the low trading activity on Monday and the likelihood that it may decline as we get closer to Thursday’s Thanksgiving break. 9.43 billion shares were traded on American markets, which was lower than the session’s average volume of 11.88 billion shares for the previous 20 trading days.
After San Francisco Federal Reserve President, Mary Daly, said that officials need to exercise caution to prevent a crash, stocks pared early afternoon losses. Cleveland Fed President, Loretta Mester, expressed that she favors a modest rate increase in December.
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As investors wait for the release of the Fed’s November meeting minutes on Wednesday, the S&P 500 continued to decline from the previous week when several Federal Reserve officials reaffirmed the central bank’s commitment to raising rates until inflation was under control. With rates projected to peak in June, traders are overwhelmingly banking for a 50-basis point increase at the December meeting.
Tesla Inc. experienced a 6.84% decline, among other stocks, after the electric vehicle manufacturer announced it will recall cars in the US due to a problem that might cause tail lights to intermittently fail to illuminate. Walt Disney Co. increased 6.30% following Bob Iger’s appointment as CEO.
USD again proved as safe heaven
On Monday, the U.S. dollar gained ground against the majority of other major currencies as further COVID-19 restrictions in China fuelled concerns about the future of the world economy and caused traders to steer clear of riskier currencies. Hopes that the Chinese government will soon loosen its tight regulations have been dashed by the latest cases. This has increased the value of the dollar, which is regarded as a shelter during stressful times.
The dollar increased by 1.2% to 142.085 Japanese yen, on track to record its biggest one-day gain since September 6th. The euro’s value vs the dollar decreased by 0.86% to $1.0235. China’s onshore yuan depreciated to a low of 7.1708 per dollar, the worst level since November 11th, after the currency opened at 7.1451.
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The Australian dollar, seen as a liquid indicator for risk appetite, fell 1.1% to a more than 1-week low of $0.66 as investors grew weary of riskier currencies. The dollar gained further support when Federal Reserve Bank of San Francisco President, Mary Daly, stated on Monday that even while she did not expect that outcome from monetary policy, the U.S. central bank could raise its overnight target rate above 5% if inflation does not slow down.
The Fed’s November meeting minutes, which are scheduled to be issued on Wednesday, will be carefully scrutinized by investors for any clues regarding the direction of interest rates. Sterling suffered on Monday as a result of a stronger dollar, falling 0.5% to $1.18225 against the greenback as investors braced for further pound weakening ahead of public finances data due on Tuesday and flash PMI readings on Wednesday.