Oil prices break into green area expecting that the OPEC meeting will not be spent in vain and the participants will find ways to pare their production capacities The weekly report of Baker Hughes showed that the drilling activity rested on some ceiling, as the growth of active drilling rigs ceased. Last week, their number fell from 765 to 764 units. After US oil producers switched from long-term outlooks to immediate profitability of the barrel, additional capacity utilization occurred only if it was not unprofitable. Slowdown in drilling activity suggests that at current prices below $50, the US supply may have reached its peak.
There has been a little bit upset with the message from Bloomberg stating that the restriction of production in Nigeria and Libya is not on the agenda of the OPEC meeting on Monday. Given that the two above-mentioned cartel participants, freed from quotas, are the two main culprits of oversaturation in the market, closing eyes to their uncontrolled production will become a rather discouraging news for investors. Significant downside risks for the oil market are not currently observed, taking into account the flight from the dollar, the growth of net positions in futures contracts (from 358.0K to 396.5K in the week ending July 21).Strong growth of prices will strengthen the chances for a transition to the ECB's more aggressive rhetoric in September, as president M. Draghi has repeatedly expressed concern about the low oil prices hindering the inflationary process.
Asian stocks started a week with growth, European stock markets are traded in the red, as the beginning of the week will probably take place under the sign of caution and risk aversion before the Fed's meeting on Wednesday. The European currency retreated after the contradictory growth last week, as despite the lack of specific instructions and terms, the markets took Draghi's comments positively. Today's reports of PMI activity in Germany and the Eurozone turned out to be worse than expectations, which, coupled with sluggish inflation in the euro area and a rather illogical rise after the ECB meeting gives grounds to believe that the European currency is overvalued and expects correction. However, the rollback is hampered by the presence of downward risks in the US currency, among which are new details in the investigation of the president's relations with Russia, as well as the Fed's uncertain position regarding the reduction of monetary support and massive MBS and Treasuries portfolio. However, amid vague and cautious Draghi speech its likely that any logical in this situation rhetoric of the Fed will look more aggressive that will help the dollar recover.
There has been a little bit upset with the message from Bloomberg stating that the restriction of production in Nigeria and Libya is not on the agenda of the OPEC meeting on Monday. Given that the two above-mentioned cartel participants, freed from quotas, are the two main culprits of oversaturation in the market, closing eyes to their uncontrolled production will become a rather discouraging news for investors. Significant downside risks for the oil market are not currently observed, taking into account the flight from the dollar, the growth of net positions in futures contracts (from 358.0K to 396.5K in the week ending July 21).Strong growth of prices will strengthen the chances for a transition to the ECB's more aggressive rhetoric in September, as president M. Draghi has repeatedly expressed concern about the low oil prices hindering the inflationary process.
Asian stocks started a week with growth, European stock markets are traded in the red, as the beginning of the week will probably take place under the sign of caution and risk aversion before the Fed's meeting on Wednesday. The European currency retreated after the contradictory growth last week, as despite the lack of specific instructions and terms, the markets took Draghi's comments positively. Today's reports of PMI activity in Germany and the Eurozone turned out to be worse than expectations, which, coupled with sluggish inflation in the euro area and a rather illogical rise after the ECB meeting gives grounds to believe that the European currency is overvalued and expects correction. However, the rollback is hampered by the presence of downward risks in the US currency, among which are new details in the investigation of the president's relations with Russia, as well as the Fed's uncertain position regarding the reduction of monetary support and massive MBS and Treasuries portfolio. However, amid vague and cautious Draghi speech its likely that any logical in this situation rhetoric of the Fed will look more aggressive that will help the dollar recover.
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results