18.10 - oil prices take the plunge
- by Anna K.
Oil prices sink due to turbulence in the output numbers.
We talked about the unusual proposal made by the European Union to the Untied Kingdom – to stay in the trade alliance with the Union until English economy is strong enough to stand on its own. And there is a good reason why everyone thinks that the economy of the Kingdom is not going to be strong enough or is going to lack stimulus after the divorce is final as the process of international and European companies and agencies leaving the UK has already started.
Committee of Permanent Representatives of the European Union has already started the process of transition for two European agencies. Now they are going to have to move from London onto European soil. European Medicines Agency and European Banking Authority are going to have to move to Amsterdam and Paris respectively.
The document ordering that is to be signed by the Euro parliament and other European officials,
What we witness right now is only the beginning of a much bigger and complicated process that is going to hit British economy in the end. The process is just what we as traders need yesterday’s proposal for – we need to know that GBP trading is going to come back to its normal pave at some point. And it is obvious now that it is not going to happen without the help from Eurozone.
Although May still thinks that there is a possibility for the deal to be made on trading relations between the sides of the divorce it is possible that right now she just can’t fully assess the damage that is going to be done to economy of her country and her currency.
It is clear that a lot of companies are going to choose to leave the island in order to have better conditions and the possibility of free trade inside the EU, we are not talking about bit international conglomerates that do not mind paying additional taxes with their million-dollars earnings. But some of the major European companies are for sure going to choose to leave for Germany, Paris and Madrid. It is simply easier to reach more audience like that.
As a result, pound is going to suffer from less tax return and less trading perspectives in the nearest after Brexit future. and we as traders are going to have to see the price for pound rising and pound falling to historical lows. And in this case it is not a selloff we can control. It is the process that is going to come and go naturally for every currency that lives through tough political changes.
It is a shame because lately pound has been demonstrating its backbone. With dollar growing against the basket of six major currencies pound hasn’t really been panicking. There were losses connected to the growth of the greenback. Bu overall the mood is positive in the region. The fall right now is going to hit all of us hard, and the longer pound waits in order to give into the pressure the more painful the impact on the equities market is going to be.
After the prices for Brent and WTI surged to the highest point in 4 tears several weeks ago we truly thought that we were not going to see the fall in a long time. Prices were aiming so high that it seemed that we were going to see the growth taking them to the old level of $100 per barrel. But today the growth has only slowed its pace, but it actually changed into a visible decrease and the prices sank bank to the old levels of lower than $7- per barrel for WTI and lower tan $80 for Brent crude.
The reason for a sudden and immediate fall in the news coming from the US. And once again, the prices for oil display their disagreement with output meddling as the US announced that their stockpiles numbers have once again grown. This news came in bigger than any tensions between the United States and Saudi Arabia that night have surfaced this week. Right now the stockpiles of the United States add up to about 6.5 million barrels of oil. Gasoline stockpiles in their turn have gone down to 2 million barrels. It is possible that the United States have intentionally increased their stockpile as there is a hurricane Michael in the way to Mexican harbor. The hurricane became a reason for shutting down the platform in the region and the output number of the United States falling by 300 thousand barrels per day.
So, it is possible that we are going to see further decline in the oil prices with the hurricane only approaching American coast. Together with immediate prices, the futures have declined as well. And the rapid changes in prices have angered a lot of traders around the world who can now easily send the asset in the selloff stage and undermine the prices for the futures even more.
With the conflict between the US and Saudi Arabia over the murder of ‘dissident writer Jamal Khashoggi’ it is easy to see one more growing conflict in the international oil scene. Trump has already threatened with the possible measures towards Saudi Arabia and we doubt that it is going to be something other than tariffs and sanctions on oil trade as Trump is famous for hitting where it really hurts.
Right now there are still disputes on whether or not OPEC are going to lower the prices for the crude which is also shanking the boat on the stable oil prices. Unfortunately, with so many different things on out plate it is right now impossible to tell whether oil trading is going to stabilize soon, although we sure hope for it.