Fears of a impending Russian invasion of Ukraine eased as Russia withdrew some troops from near the Ukrainian border, pushing investors to profit from oil prices, which fell more than 5 percent intraday on Tuesday. Other signs of increased U.S. shale gas supply and optimistic expectations of negotiations on the Iran nuclear deal have also weighed on oil prices. Still, Biden insisted that Russia could invade Ukraine, lingering concerns about energy supplies, and falling U.S. API crude inventories limiting the decline in oil prices. As of the U.S. close, U.S. crude oil March futures closed down $2.32, or 2.45%, at $92.46/barrel, with an intraday high of $95.15/barrel and a low of $90.66/barrel; Brent crude Oil April futures closed down $2.28, or 2.38%, at $93.48/barrel, with an intraday high of $96.23/barrel and a low of $92.03/barrel.
The withdrawal of Russian troops has eased market fears of an imminent Russian invasion of Ukraine and eased fears of disruptions in crude oil supplies in the region, putting enormous downward pressure on oil prices. Russian Defense Ministry spokesman Konashenkov said on the 15th that the troops of the Russian Southern and Western Military Regions have completed the military exercise task and set off to return to the station on the same day. Russian President Vladimir Putin has just said that a partial withdrawal decision has been made and that such a withdrawal could see further progress. For crude oil, the first signs of easing tensions triggered a profit-taking, as the geopolitical risk premium fell.
At the same time, negotiations between the United States and Iran on restarting the nuclear deal between Tehran and the world power are progressing well, which has increased hopes for Iranian crude oil to enter the market and increased downward pressure on oil prices. Russia's foreign ministry said "tangible progress" had been made in restarting the Iran nuclear deal. Hiroyuki Kikukawa, general manager of research at Nissan Securities, said: "If the Iran-US nuclear negotiations are agreed, or if global equity markets plunge further amid concerns about inflation and tightening monetary policy by central banks, there could be a substantial correction in the oil market." Citibank said the U.S.-Iran deal will adversely affect oil prices in the short term and by the end of 2022.
Standard Chartered analysts Emily Ashford and Paul Horsnell noted in the report that crude oil prices have been "high enough to significantly reduce demand growth." The bank's forecast for OPEC crude oil demand growth fell to 44,000 b/d from 1.5 million b/d in August, OPEC does not need to worry about the impact of high oil prices, but the impact is already beginning to show, demand growth is likely to decline, and supply in the United States will be unexpectedly larger in 2022 and 2023.
However, the remarks by Russian President Vladimir Putin and US President Joe Biden have surfaced geopolitical risks and challenged market optimism, which has limited the decline in oil prices. Russian President Vladimir Putin expressed dissatisfaction with Ukraine's NATO membership negotiations, while U.S. President Joe Biden said that "the possibility of Russia attacking Ukraine remains high." Speaking across the country on Tuesday, Biden warned that the U.S. had not yet verified whether Russian forces would return to Russia and that Russia could still invade Ukraine. Biden added that the U.S. and NATO have no plans to deploy missiles in Ukraine, and that the U.S. and NATO pose no threat to Russia. If Russia invades Ukraine, the United States and its allies are prepared to impose strong sanctions and export controls on Russia, and say the Nord Stream 2 pipeline will not continue to operate, which will have an impact on energy prices.
One topic of concern is that Russian President Vladimir Putin may immediately recognize the independence of Luhansk and the Donetsk People's Republic, both of which are divided areas of eastern Ukraine. Putin claims that "genocide" is taking place in the Donbass region of eastern Ukraine and that most Russians support areas controlled by rebels. We must work to resolve the problems in Donbass, he continued, saying that the solution should be based on the Minsk peace process. Western officials have criticized the Russian State Duma for voting in favor of recognizing Ukrainian independence, which would undermine the Minsk agreement aimed at implementing a ceasefire in Ukraine's civil war.
Geopolitical strategists fear that Russia could create a false pretext for military action against Ukraine by rekindling violence in the east, and that recognizing the independence of the Luhansk and Donetsk People's Republics could be a step in that direction. For now, crude oil traders will remain on the fray, and news headlines about Russia/Ukraine will remain a key driver of the oil market. Warren Patterson, head of commodities strategy at ING, said the only real focus on the market at the moment is Russia-Ukraine, and the development of the situation in this regard is crucial to the direction of prices.
Commerzbank sharply raised its oil price forecast for the first half of the year, but expects oil prices to still fall this year. The bank pointed out in the analysis report that the decline in spare capacity means that oil prices will be higher than previously expected in the second half of this year, reaching $80 / barrel; for this quarter, brent crude oil prices are expected to reach $90 / barrel (previously expected to be $80); oil prices are expected to still rise sharply to $85 / barrel in the second quarter (previously 75 US dollars); if Russia invades Ukraine, Brent crude oil prices may be significantly higher than $100 / barrel.
At the same time, U.S. crude oil inventories unexpectedly recorded a decline, Cushing crude oil stocks fell for the sixth consecutive week, and gasoline stocks fell for two consecutive weeks, which also provided some support for oil prices. According to the latest data from the American Petroleum Institute (API), for the week ended Feb. 11, API crude oil inventories decreased by 1,076,000 barrels to 397.1 million barrels, a decrease of 2,025,000 barrels prior to the expected decrease of 1,769,000 barrels; gasoline inventories decreased by 923,000 barrels, or 1,138,000 barrels prior, an expected increase of 625,000 barrels; refined oil inventories decreased by 548,000 barrels, a decrease of 2,203,000 barrels, an expected decrease of 1,225,000 barrels; and Cushing crude oil inventories decreased by 2,382,000 barrels, or 2,502,000 barrels in the previous value.
Next, market participants will focus on the official oil inventory data of the U.S. Energy Information Administration (EIA). Crude inventories are expected to fall by 1.769 million barrels for the week ended February 11, compared with a 4.756 million barrel decrease in the previous week. If the inventory decrease is expected to increase the upward momentum of oil prices. In addition to Russian headlines and inventory data, U.S. retail sales and federal open market committee (FOMC) meeting minutes for January will also be closely watched as rumors suggest the Fed will raise interest rates by 0.50%. Recently, a Reuters survey of economists showed that "the Fed will start its tightening cycle in March with a 25 basis point rate hike, but a growing number of economists say the Fed will opt for a more aggressive 50 basis point hike to curb inflation." ”
DOLLAR INDEX
The dollar index continued to be under pressure after opening slightly lower on Tuesday, falling as low as 95.919 as some Russian troops began returning to permanent bases after the exercises ended, market panic subsided and safe-haven demand for the dollar fell. Although the dollar index closed down for the first day of four days on Tuesday, the recent rally in the dollar is not over. Even though news of Russia's partial withdrawal from the Russian-Ukrainian border led to a short-term correction in the index, it was still 1% above its January low. The residual momentum should continue to support the dollar rally, especially given that interest rate pricing reflects the expectation that the Fed will raise interest rates in the early stages, making it costly to short the global reserve currency.
The U.S. Producer Price Index (PPI) rose 9.7 percent year-over-year in January, well above economists' forecast of 9.1 percent and unchanged from 9.7 percent in December, and up 1.0 percent month-on-month, well above expectations of 0.5 percent, the latest report released by the U.S. Bureau of Labor Statistics on Tuesday. The core PPI was also significantly higher than expected, up 8.3% year-on-year in January, with market expectations falling to 7.9% from 8.5% in December and accelerating to 0.8% from 0.6% in December, higher than market expectations of 0.5%. Although the PPI data was much higher than expected, the core PPI declined year-on-year, and this figure does not appear to have an impact on the US dollar.
Surveys released by the New York Fed showed the New York State of Business Index rose to 3.1 in February from a negative 0.7 in January, well below expectations to rebound to 12.15. The new orders index rose to 1.4 from -5.0 in January, the payments price index fell slightly to 76.6 from 76.7, the employment index rose to 23.1 from 16.1, and the six-month business conditions index rose to 28.2 from 35.1.
Later today, the U.S. will release January retail sales data and the minutes of the Federal Reserve meeting, which will trigger close attention from market participants. U.S. retail sales fell 1.9 percent month-on-month in December, the biggest drop in 10 months, highlighting the fact that consumer spending began to shrink amid soaring inflation. Considering the sharp spike in oil prices, retail sales are expected to grow in January. Analysts at FYCM Societe General Investments (UK) expect U.S. retail sales to rise 1.6 percent in January, core retail sales after excluding cars to rise 0.7 percent, and control group retail sales to rise 0.1 percent.
The Fed hinted two weeks ago that it could raise interest rates in March and reiterated that it would end its bond buying program at that time, followed by a massive balance sheet reduction. FOMC members also agreed on a set of principles for reducing the balance sheet by "significantly" reducing the sizeable balance sheet by adjusting the amount of reinvestment in the principal of bonds due each month. The minutes should focus on statements about how the Fed will shrink its balance sheet after the March rate hike, including some clues about the specific date, pace or final size.
Technical analysis
U.S. crude oil
Daily chart: Poly Plus channel convergence, oil prices fall back to the middle rail; 14-day moving average turned down, 20-day moving average bullish; stochastic indicators lower.
4-hour chart: Poly Plus channel convergence, oil prices develop below the middle rail; 14 moving averages bearish, 20 moving averages bullish; stochastic indicators higher.
1-hour chart: Poly Plus channel convergence, oil prices develop below the middle rail; 14-hour moving average is bullish, 20-hour moving average is bearish; stochastic indicators are lower.
Roundup: It is expected that intraday oil prices will oscillate in the range of 90.65-93.50, and you can try to sell high and suck low. The upper resistance focuses on the February 16 high of 92.50, which will be followed by a break above the February 4 high of 93.15, followed by the February 13 low of 93.50 and the February 11 high of 94.65, as well as the February 15 high of 95.15 and the February 14 high of 95.80, while the below support will keep an eye on the February 16 low of 91.60, a break below will explore the February 15 low of 90.65, then the February 4 low of 90.05 and the February 2 high of 89.70, as well as the February 11 low of 89.20 and the February 1 high of 88.85.
Brent crude oil
Daily chart: Poly Plus channel up, oil prices retreat to the middle rail; 14 and 20-day moving averages are bullish; stochastic indicators are lower.
1-hour chart: The Polyga channel is falling, oil prices are developing below the middle band; the 14- and 20-hour moving averages are bearish; the stochastic indicator is lower.
Roundup: It is expected that intraday oil prices will oscillate in the range of 91.30-93.95, and you can try to sell high and suck low. Upper resistance focuses on the Feb. 16 high of 93.50, a breakout will go up to the Feb. 7 high of 93.95, followed by the 95.00 psychological mark and the Feb. 11 high of 95.60, as well as the Feb. 15 high of 96.25 and the Feb. 14 high of 96.75, while the lower support keeps an eye on the Feb. 16 high of 92.70, a break below which will explore the Feb. 15 low of 92.00, then the Jan. 28 high of 91.65 and the Jan. 27 high of 91.00, and the Feb. 11 low of 90.50 and the Feb. 9 low of 90.00.
Wednesday Follow:
U.S. Import Price Index for January
U.S. Retail Sales in January
U.S. industrial output in January
US NAHB Property Market Index for February
U.S. EIA Weekly Crude Oil Inventories Report
Minutes of the Fed's Monetary Policy Meeting
Minneapolis Fed President Kashkali spoke
This article originated from the financial world