24.10 - political climate shifts economic situation
- by Anna K.
Prices for oil attract out attention for all the wrong reasons.
Once again we find ourselves in the situation when oil attracts all of the attention of the markets’ participants for all the wrong reasons. Just in the beginning of October we were talking about oil’s amazing performance when both of the major crudes gained their price even though output was uncertain. Back then we hoped to see the prices for crude go up towards $100 per barrel price points. But today we see that there is not as much power in the asset as we hoped there would be.
Today oil slid by as much as 5 percent of its peaking price. Both immediate crude as well as futures lost a lot of price and it seems that now oil will have hard tome climbing back towards the previous positions of higher than $70 per barrel for WTI and higher than $80 for Brent.
Prices slid with the minister of energy of Saudi Arabia saying that even due to the international scandal and direct link of the country towards the cold-blooded murder of Saudi journalist the country is not planning on cutting the numbers for oil output as well as export numbers. Even more, it seems that the Saudis are going to rise output numbers towards 11 million barrels per day point.
All of that couldn’t help but upset the market and the pieces were trimmed. Traders’ outlook on the plans of Saudi Arabia to boost output numbers is mostly negative. We also think that more crude in the markets is not going to boost the prices. The risk of getting involved with Saudi Arabia and then getting under American sanctions are wat too high. Individual traders are also going to stay further from the crude as the risks of the rapid and sudden fall are way too high.
That’s right. The main advantage of oil has turned into its weakness – too many players in the picture. The fact that a lot of sides are able to influence the situation used to be good, but now we see that so many threads can lead towards price and output manipulation we never knew were possible.
See for yourself – Iran and Saudi Arabia, though under the threat of the hardest hit are not going to slow down in output and export numbers – market is shaking. United States increase their crude inventories without letting the world community know, plus there is always a hazard for American cost to be hit by the hurricanes and other nature catastrophes, so the world output is messed with again. Russia is always trying to increase output numbers for itself via pushing on OPEC. All and all it seems there is absolutely no side to the conflict that would strive to keep trading stable in this segment of the market.
Can we do something? Only wait at this point. Wait and look very carefully towards the actions of all of the sides in general and United States in particular. After all they are the ones slapping tariffs and sanctions around like no one else’s business.
We talked about midterms coming soon just yesterday, but today we got to thinking of whether everything that surrounds the upcoming vote is influencing and changing political and economic picture of the future. although the elections are two weeks away from us, we already want to see the full spectrum of influence upon the situation in the world.
Are you watching political climate changing in the world? Right now the situation is so difficult that it is hard to see where economics end and politics begin. One always influences the other. And mid-term elections in the United states seem to be a perfect opportunity to see the confirmation for the statement. For example, after alleged Russia meddling and disinformation campaign in the Presidential elections of 2016 it is important for all of the services, which are the part of the campaign to stay alert. United states even went as far as to create several services which are going to prevent cyberattacks from Russia in order to make the upcoming elections fair and free.
Do you think something like than can go by unnoticed? Do you think something like that will not be reflected on Russia economy? Of course it will! The less trust there is towards Russia, the more chances there is for a selloff and traders going away.
Take the current situation with Iran. Economic pressure over political interests have escalated prices for oil just a few weeks ago. And now another political crisis, this tome between United States and Saudi Arabia is knocking the prices down, damaging economies of the countries involved in oil trading and extraction but not involved in the conflict.
More neutral countries that rarely appear in the political news are the goal for traders nowadays. Sweden, Norway, Switzerland, Canada, Mexico, Japan – these are the countries with relatively stable national currencies as well as good international image. We do not talk too often about them because of the lack of the extreme news about the countries. The situation inside them is extremely different, but they can provide a necessary to us level of comfort and stability for at least some time.
Of course we say that understanding that the greenback always has the last laugh and its movements can immediately influence economic situation in any of these countries. But despite all of the political and economic turbulence that might be present in the world, we have never abandoned the markets and we will not do it now. we just have to be extremely careful with chosen assets.