The focus stays in the Eurozone as the Greek election over the weekend shows a big win by the far-left opposition party Syriza. Likely winning enough seats to form a government on its own, Syriza’s leader Alexis Tsipras would likely become the prime minister, making Greece the first Eurozone government openly opposed to bailout conditions imposed by the EU/IMF/ECB Troika.
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First Anti-Austerity Government Elected
Commodities slumped, paring the gains previously made, as investors took profits after receiving mixed economic data. The front-month contract for WTI crude oil initially slipped to a 4-day low of 1029.1 before ending the day at 1037.5, down -0.29%. The Brent crude contract, however, climbed to as high as 109.75, a level not seen since March 4, before settling at 109.36, up +0.27%.
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Commodities Slumped on Profit-Taking; Yellen’s Speech, BOC Meeting in Focus
China’s trade surplus widened to US$31.9B in January from US$25.6B in the prior month as both exports and imports accelerated ahead of Lunar New Year holidays. Exports rose +10.6% y/y in January, up from +4.3% in December. Import growth picked up to +10.0% y/y in January after a +8.3% increase in the prior month although Lunar New Year holidays shortened the number of working days and the base was high last year.
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China Trade Surplus Widened in January While ECB Reaffirmed to Keep Rates Low
Financial markets recovered on bargain hunting. Wall Street gained with the DJIA and the S&P 500 indices rising +0.47% and +0.76% respectively. In the commodity sector, US crude oil prices climbed higher as risk appetite improved and the US government was reported to have authorized limited exports of crude to Europe. The front-month contract for WTI crude oil gained for the first time in 3 days, up +0.79%. The Brent crude contract was pressured for a third consecutive day, losing -0.58% yesterday.
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Risk Appetite Picked Up ahead of APD Employment Report
Market sentiment improved modestly with US treasury yields dropping mildly and positive news from retailers. Wall Street was mixed with the DJIA losing -0.05% and the S&P 500 added +0.38% at close. Investors remain cautious as they await the FOMC minutes. Meanwhile, news flow from the Eurozone continued to disappoint.
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Sentiment Improved Despite Worsened Situation in Peripheral Eurozone
The market’s focus was on China’s growth outlook last week. Flash China Manufacturing PMI complied by HSBC/Markit slipped to an 11-month low of 47.7 in July from 48.2 a month ago. The reading indicated “a continuous slowdown” in manufacturing activities and signaled further pressure on the job market.
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Weekly Fundamentals – Commodities to Remain Fragile amid Concerns over Economic Growth
US WTI Light crude oil futures hit a 14 month high in trading yesterday as investors piled back into the commodity due to concerns over the Suez Canal passage in Egypt where the current Morsi government has been ousted.
Latest WTI Oil Price
ICE Futures US WTI oil was trading at $101.25 a barrel, 07:18 GMT this morning in the ICE Futures Exchange. US NYMEX Light crude oil futures edged up and was trading a further $2.26 at $101.86 a barrel yesterday.
Oil Prices, Morsi & Suez Canal
Traders are worried that the volatile political situation in Egypt could interrupt oil flows through the Suez Canal and the wider Middle East, which account for around 25 percent of the world’s oil output, however the Suez Canal sees just over 2 percent of world oil needs pass through it daily.
The Suez Canal Authority, which operates the waterway, said it “has all the authorities needed for running the Canal without being limited by the laws and the systems of the [Egyptian] government”.
The Egyptian president, Mohammed Morsi, faced protests from millions of Egyptians this week and the Egyptian military threatened to disband parliament and put in place a new leadership early on Wednesday. Then, a senior Egyptian opposition leader yesterday urged army chiefs to take control of the country as the threat of civil war sent oil prices soaring.
Mohamed El Baradei met Egypt’s senior general shortly before a deadline passed at 15:00 GMT, after which military chiefs said they could and would depose of Morsi. However, Mr Morsi rejected the deadline but the meeting was seen in Egypt as a sign that the army was already taking concrete steps towards removing him.
A polarised Egypt is now facing the most critical phase of its post revolutionary life after Egypt’s army finally ousted Morsi and has now scheduled fresh elections in a what was labeled by the presidency as a “full coup”.
The chief of the armed forces, General Abdel-Fatah al-Sisi, announced that he had suspended the constitution and would nominate the head of the constitutional court, Adli Mansour, as interim president on Thursday. Both presidential and parliamentary elections would follow shortly afterwards and a transitional cabinet would be named.
A statement on the former president’s Twitter and Facebook accounts labeled the military move a “full coup”, after Morsi was officially deposed from office at 7pm.
It remains to be seen what the outcome will be for Egypt and indeed Morsi however, the price of WTI crude oil is poised to remain over $100 a barrel as this situation plays out.
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US oil price hits 14 month high on concerns over Suez Canal passage
Any rebound in gold price proves short-lived. The yellow metal has plunged almost 12% since the beginning of June, following the -11% decline in each of May and April.
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Gold Price Month-to Date Decline in June Already Exceeded Falls in May and April
Financial markets got another good day as driven by positive data from the US and China. Wall Street soared with the DJIA and the S&P 500 indices gaining +0.42% and +0.36% respectively. Commodities were, however, not as bullish with the front-month contract for WTI crude oil losing -1.19% and the Brent crude contract plunging for a second consecutive day, by -1.44%, for the day.
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US and Chinese Data Support Financial Markets Further
The price of a barrel of Brent oil opened Thursday’s trading session near $118 but recent gains now seem limited as global demand for crude oil comes back into focus after the latest IEA forecast is trimmed lower.
Latest Brent Oil Price
In London, Brent crude oil futures for March 2013 delivery was trading at $117.97 a barrel, or 0.2 percent higher at 07:18 GMT this morning on the ICE Futures Exchange. Meanwhile, New York’s NYMEX WTI crude settled at $97.01 a barrel at close yesterday, down 50 US cents from Tuesday’s price.
IEA Oil Demand Forecast for 2013
The IEA (International Energy Agency) has lowered its consumption forecast by 85,000 barrels a day compared with data from a month ago. The IEA now expects the world to use 90.7 million barrels of crude oil a day this year. Analysts have said that crude oil prices avoided dramatic fluctuations recently, mainly because of the difficulty in pinpointing what energy demand will be this year.
“Despite signs of improvement in China and the United States, weak macroeconomic conditions are forecast to keep global oil demand growth capped,” it said, estimating global demand in 2013 at 90.7 million bpd.
For a long term outlook, it maybe interesing to note that the IEA forecasts average oil prices of around $175 per barrel by the year 2017.
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This article was written by: JR @ liveoilprices.co.uk
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Brent oil price hovers near $118 as global demand comes back into focus