2016 In Glitters And Jitters

2016 turned to be full of surprises. It was fascinating with ambitious, adventurous, sometimes irritable and sizzling characteristics. Stocks recovery from the worst-ever starts, Brexit, Trump, oil, central bankers intervention. I may say it was an extremely interesting year all along the way and here are the events that labelled 2016 and shaped the financial markets.

The brutal year start ever. During the first ten days of January Chinese stocks plummeted and caused deterioration on markets. The world was somehow hammered by fears about China’s economy turmoil and the weakening of Chinese Yuan. What actually happened with Shanghai Composite Index:

Of course stock markets tumbled world-wide, many companies suffered and experienced their worst start to a year. A kind of huge anxiety on markets. The shares of some companies marked huгe declines. Here they are:

What shivered the markets at the end of January was the slump of oil prices. Crude oil prices hit a remarkable low at $27.88 a barrel and provoked sell off in energy sector shares and bonds, high-yield debt and all considered as risky assets. 

The next jitter was served by the Bank of Japan, when at the end of January announced that will keep the negative interest rate policy. This mirrored in investors withdrawals and facing higher-yielding euro zone, UK and US dept.

The next and genuine shock for the markets was Brexit. The UK’s vote rocked global markets and something very bad happened. The Sterling dropped with 11% during the referendum day and $3 trillion was wiped out from the global stocks the next two days. The GBP/USD pair suffered most and marked a very very murky year. What actually happened with the Cable is clearly seen on this chart:

In the middle of the year some glitters shines over the markets. Throughout July and August S&P 500 set all time highs. The US economy growth is improving and is stable and boosted Wall Street. The uncertain political climate was fading away, the sun started to shine over the  global stocks and led their way to finish the year in the green.

In September the shares of Germany’s biggest bank dropped to lowest levels for decades after the US Justice Department proposed that the bank must pay $14 billion to settle mortgage-securities probes coming from the financial crisis. The domino effect was inevitable. Another European banks grasped the weak economy.

In November the focus was set on the US presidential elections. The most contentious race was about to be won by the Democratic candidate Hillary Clinton. Well it didn’t happen and markets hardly digested this shock, because what was expected speaks much: 

Well the shock was short lived and market participants welcomed the game changer and cheered the implementation of fiscal stimulus, taxes cuts and the rolling back on regulations for the US business.

Wall Street equities have moved to higher levels. Selling of bonds motored further after the Federal Reserve announced that will act more aggressive and will take actions for rate hike next year.

Further on markets faced the non-Opec producers agreement in late November.The global supply glut was an enormous pain, but finally we witnessed a solution. And in fact the cut in December contributed to the return of Opec and even boosted the oil prices.  

Well it seems that we're living in interesting time and I'm curious what next year is going to bring. 

AUD/USD close to 3-week high

The Australian dollar is trading elevated today, boosted by OPEC’s deal to cut output. This remarkable event pushed higher the commodity currencies and thrilled the risk appetite. 

Aussie hit an intraday high at 0.7709 but shortly afterwards fell down. RSI shows close to overbought market, which confirms the profit-taking actions by market players. 

As seen on the four hour chart, the 50-day moving average is crossing the 200-day moving average and currently is staying above, which is to indicate the bullish trend. Support is located around 0.7620, where currently is located the 50-day MA. The short-term outlook remains bullish, but bulls should conquer the 8^th September high at 0.7731 and 9^th August high at 0.7833 for confirmation of the long-term trend.

Oil production in OPEC dropped to 3-month low in August

Oil production in the OPEC dropped to 3-month low in August, according to the preliminary data. The production in the cartel has decreased by 200 thousand barrels a day to 33 million barrels a day in August, which is the lowest level since May. The OPEC data will be officially presented on Monday, but before the official publication some corrections might be expected.

The decline in production is due to decreases in the production of Saudi Arabia, the United Arab Emirates, Kuwait and Qatar. Some representatives of the organization state that the countries lower the record-high yields and are ready to cooperate for the sake of possibly freezing yields. Later this month this will be discussed at a meeting in Algeria.

The yield in Iran remains at 3.6 million barrels per day in August - as in May. The Islamic Republic said it wants to increase production to over 4 million barrels per day. Some OPEC officials claim that Tehran has already reached that level.

The output in Venezuela has decreased by 200 thousand barrels per day this year and the last two months has stabilized to 2.1 million barrels per day. Production in Algeria and Libya in August decreased respectively by 9000 barrels per day and 28 thousand barrels per day.

Only Iraq and Nigeria have significant increases. Authorities in Baghdad have reported OPEC that the yield increased by 32 thousand barrels per day to 4.64 million barrels a day in August. In Nigeria the production increased by 186 thousand barrels per day to 1.46 million barrels per day.

Crude oil pressured by the strong US dollar

Crude oil prices are moving downwards after both benchmarks WTI and Brent reached the psychological level at $50.00 per barrel for first time since respectively October and November last year. The appreciation of "black gold" could be considered by the Fed as another sign for economy improvement in global aspect, that could support the eventual increase in interest rates in the US in June.  The appreciation itself would hardly be a determining factor in the decision of the central bankers, but that in turn would affect the levels of inflation in the country. Although it is not expected significant reduction of production levels, investors are awaiting the OPEC meeting on Thursday in Vienna, which outcome would impact on quotations of the crude oil.

Today oil prices still suffer from the stronger US dollar, though it was slightly supported by the beginning of the summer season in the US, which coincides with the US crude production decline to its lowest level since September 2014.

Today's trend is a continuation of the market situation from the end of last week. In the morning WTI slipped with 12 cents to trade at $49.21 and Brent fell with 21 cents to $49.11.

On Wednesday will be released the data by the American Petrolium Institute and on Thursday is due the official government data. And ahead of the OPEC meeting, this week will bring increased volatility on markets. 

Oil

Oil prices rocked high to $44.50 and walked out the past week with almost $44. An announce of support turned to be the aching OPEC plan for a meeting in May. This factor is not the only glint that walks alone. Vital signs popped along with advantageous data from China, where imports in March shined with historical levels of 7.7 million barrels, or 21.6% more yoy. 

The Doha soundtrack is fading away even a bearish echo interfered the market participants.

A kind of versatility glowed up with some short-term rays brought by the big supply disruption in Kuwait and further declines in US production.

But clouds over the greenback usually tremble the oil market. Last week the US dollar crumbled down and investors reconsidered their track after pushing prices to 5-month highs.

Today the futures for WTI rolled down with 1.92%  to trade at $42.80, Brent slid with 1.02% to $44.65.

The picture can not come alive without fundamentals. On Tuesday and Wednesday latest US supply trends are due. This will be carefully followed by market participants as a small impulse may stir the markets.

The oil prices fell to extremely low levels with lost track of speed. This in fact turns to be an oversold tool and a momentary price increase is quite likely.

So until my words dry out, oil market suggests developing potential, that is not put in all of the papers.

Diesel and dust

Doha soundtrack crackled with shifting sounds and broken plans.

The global oil producers failed to agree on cutting crude output.

The optimism disappeared when Tehran announced that will not accept these bans,

as Iran screamed to the world after years of economic isolation cut.

Shortly after the meeting in Doha oil prices fell with nearly 8% to $37.60.

Black gold started trading with a decline of $3, Brent even dropped to $40.85.

So the agreement on an output freeze deal into dreamland turns,

but frankly isn’t it a wicked game that the oil market burns

than if there was no meeting at all.  

Bullroars can not be heard in a knock-em-down storm.

Crude oil blessed

Over the past week crude oil snatched gains and the price rocketed to highest level in 2016, while the US dollar continued to depreciate against the basket of major currencies.

US light crude were seen at $38.50 per barrel, which is the fifth consecutive weekly gain. And this is based on the hopes that the major oil producers will achieve agreement on production freeze. The weakened dollar also supported the "black gold", which peaked at $40.54 per barrel. OPEC leader Saudi Arabia and other countries of the organization, along with Russia will meet in Qatar on April 17 to discuss the floating idea of production freeze. 

The positive mood on the potential agreement strongly supported oil prices, but cutting the output could not neutralize the glut. However, this is seen as a good start in trying to stabilize the oil market, which gives impulse to the crude oil. Brent was also inspired and reached its highest value since early December at $41.60 per  barrel. Oil prices recovered with over 50% as quotes fell to 12-year lows under $26 for WTI and $27 for Brent.

It was a picturesque rally. But if we witness just cutting output along with shadows over r the neutralization of the glut, the possibility of renewing the depreciation remains in place.

Oil prices back below $30

Oil prices dropped during the today’s session. WTI fell below the $27 level as the recent crude oil stockpile report revived fears about the huge supply glut. Futures for WTI plunged 4.30% to $26.27 per barrel, while Brent futures slided with 2.17% to $30.17 per barrel.

The Energy InformationAdministration (EIA) said on Wednesday that total crude stockpiles in the US slipped unexpectedly by 754,000 barrels over the week to February 5, compared to forecasts of a rise of about 3.13 million barrels.However, crude reserves at the Cushing, Oklahoma delivery hub increased to an all-time high of nearly 65 million barrels.The report also showed that gasoline inventories jumped by 1.26 million barrels over the measured week, much more than the rise of 243,000 barrels expected by analysts.Moreover, distillate stockpiles climbed by 1.28 million barrels, compared to afall of 1.58 million barrels expected by the market.On Wednesday, OPEC said in its latest monthly report it pumped 32.33 million barrels per day (bpd) of crude during January, up from the32.20 million bpd seen in December.The cartel expects world oil demand to grow by 1.25 million bpd to94.21 million bpd this year, only a small downward adjustment from the previous forecast. Non-OPEC oil supply is projected to decline by 0.70 million bpd to average 56.28 million bpd.The International Energy Agency(IEA) said earlier this week that oil prices may fall further this year as the global oil surplus is likely to worsen thanks to increased output from Iran. The country produced 2.99 million bpd in January, a rise of about 80,000bpd from prior levels.Iran's Oil Minister Bijan Zangeneh said his country is open to begin talks with other OPEC members as conditions in the oil market continue to decline.The EIA cut its price forecast for WTI to $37.59 per barrel for this year,compared to the $38.54 projected a month ago. The price for Brent should average $37.52 a barrel this year, down from the previously expected $40.15 a barrel.