Crude ended the week on a high note — with Brent closing above $67/ barrel and WTI above $63 — as sentiment in the global financial markets continued to recover from a fresh jolt Wednesday. US stocks gained the most at Friday’s market close after equities in Europe and Asia made modest recoveries. However, stocks remain vulnerable to volatility and more sell-off, which we expect to be mirrored in crude. Bullish bets by speculators in ICE Brent and NYMEX WTI crude futures dropped consistently from a record high in the two weeks to February 20 but remain well above historical norms.
Crude began reconnecting with its own fundamentals this week as the financial markets appeared to be consolidating after the previous two weeks’ extreme volatility. But the unease around inflation and interest rates, which maintained pressure on equities, was a driver in the crude markets too. This was especially evident in the intraday price movements of Brent and WTI futures round the clock, which were often in sync with the movements in the respective region’s stock indexes.
Understanding the ongoing relationship between the turmoil that racked the financial markets across the world starting February 2 and crude prices is important. As long as the financial markets remain volatile — current signals suggest continued turbulence — we see the linkage remaining intact. That means looking at just the usual oil price drivers will yield only part of the picture. The US dollar has re-established a strong inverse correlation with crude prices since December and will also be buffeted by the shifting expectations on interest rate hikes. That offers another reason to keep a close watch on the financial markets.
Fears over a more hawkish Fed re-emerged following the release Wednesday of the minutes of the January Federal Open Market Committee meeting. The minutes showed several members of the Fed policy-making body had revised up their forecasts for economic growth in the US and elsewhere in the near term compared with their outlook in the December 2017 meeting. The market interpreted that as bullish and confirming expectations of three quarter-point interest rate hikes by the Fed through 2018.
The benchmark US 2-year Treasury yield closed at 2.26% Wednesday, its highest in nearly a decade, and the S&P 500 and Dow Jones Industrial Average indexes tumbled. The dollar closed at its highest level in a week. Brent settled a mild 17 cents higher on the day, while WTI eased 22 cents.
Crude climbed 1.5-1.8% Thursday after the US Energy Information Administration reported a surprise decline of nearly 1.62 million barrels in commercial crude inventories in the country for the week to February 16. However, Brent and WTI futures were alternating between green and red in intraday trading Friday, moving in step with the mood in each region’s stock markets, before being led to a strong finish by a rally in the US stocks.
Understand the mechanics of oil pricing. Learn how global benchmark oil prices are set and how that information percolates down to the price tag at the petrol pump.
Attend "What Determines the Price of Oil" - https://goo.gl/fz3YrL with Vandana Hari this March 2018 in Singapore
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In the last week, global crude oil price benchmarks have leapt up by some US$5/b. Brent is now in the US$66/b range, while WTI maintains its preferred US$10/b discount at US$56/b. On the surface, it would seem that the new OPEC+ supply deal – scheduled to last until April – is working. But the drivers pushing on the current rally are a bit more complicated.
Pledges by OPEC members are the main force behind the rise. After displaying some reticence over the timeline of cuts, Russia has now promised to ‘speed up cuts’ to its oil production in line with other key members of OPEC. Saudi Arabia, along with main allies the UAE and Kuwait, have been at the forefront of this – having made deeper-than-promised cuts in January with plans to go a bit further in February. After looking a bit shaky – a joint Saudi Arabia-Russia meeting was called off at the recent World Economic Forum in Davos in January – the bromance of world’s two oil superpowers looks to have resumed. And with it, confidence in the OPEC+ club’s abilities.
Russia and Saudi Arabia both making new pledges on supply cuts comes despite supply issues elsewhere in OPEC, which could have provided some cushion for smaller cuts. Iranian production remains constrained by new American sanctions; targeted waivers have provided some relief – and indeed Iranian crude exports have grown slightly over January and February – but the waivers expire in May and there is uncertainty over their extension. Meanwhile, the implosion in Venezuela continues, with the USA slapping new sanctions on the Venezuelan crude complex in hopes of spurring regime change. The situation in Libya – with the Sharara field swinging between closure and operation due to ongoing militant action – is dicey. And in Saudi Arabia, a damaged power repair cable has curbed output at the giant 1.2 mmb/d Safaniuyah field.
So the supply situation is supportive of a rally, from both planned and unplanned actions. But crude prices are also reacting to developments in the wider geopolitical world. The USA and China are still locked in an impasse over trade, with a March 1 deadline looming, after which doubled US tariffs on US$200 billion worth of Chinese imports would kick in. Continued escalation in the trade war could lead to a global recession, or at least a severe slowdown. But the market is taking relief that an agreement could be made. First, US President Donald Trump alluded to the possibility of pushing the deadline by 2 months to allow for more talks. And now, chatter suggests that despite reservations, American and Chinese negotiators are now ‘approaching a consensus’. The threat of the R-word – recession – could be avoided and this is pumping some confidence back in the market. But there are more risks on the horizon. The UK is set to exit the European Union at the end of March, and there is still no deal in sight. A measured Brexit would be messy, but a no-deal Brexit would be chaotic – and that chaos would have a knock-on effect on global economies and markets.
But for now, the market assumes that there must be progress in US-China trade talks and the UK must fall in line with an orderly Brexit. If that holds – and if OPEC’s supply commitments stand – the rally in crude prices will continue. And it must. Because the alternative is frightening for all.
Factors driving the current crude rally:
Already, lubricant players have established their footholds here in Bangladesh, with international brands.
However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.
For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands.
Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market.
The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.
The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.
A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.Why “Lubricants shelf” is key to monitor engine oil market?
The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.
And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.
You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.
Regularly, lubricants retailers have to welcome the representatives of newly entered brands.
And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.
On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.
However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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