April 25, 2024

Global Markets React to US Inflation & Russian Output Cuts; Oil Prices Remain Volatile

The forex market is always moving, and Friday was no exception. Oil prices paired gains earlier in the day, thanks to the strength of the USD. This pressure was brought about by spending data released earlier in the week, which exceeded analyst expectations.

Despite this, the WTI deliveries for March rose by 1.23% to $76.31 per barrel after adding 1.5% earlier in the day. Likewise, the Brent crude oil deliveries for March also rose by 1.1% to consolidate at $83.15 per barrel. These gains show that the forex market remains highly volatile, with even the slightest data releases having a significant impact.

Forex traders have increasingly relied on technical analysis to predict market movements in recent years. However, fundamental analysis, such as tracking economic data releases, remains an essential tool for traders. This analysis is especially true for short-term traders looking to capitalize on quick price movements.

US Inflation Higher than Expected, Putting Pressure on Policy Makers

The latest persistent inflation indicators have pressured policymakers to raise interest rates. The FED’s preferred inflation metric, the Personal Consumption Expenditures (PCI), came in higher than analyst predictions. This data, coupled with the US inflationary figures, was a key factor on Friday.

According to Ole Hansen from Saxo Bank, the better-than-expected results show that inflation is on the wrong path. This news has made traders cautious and eager to see how policymakers react.

Oil prices have been fluctuating this year, heading toward a bullish outlook. The optimism in China’s economic rebound and the lifting of COVID restrictions have played a significant role. As the globe’s largest importer of crude oil, China’s economic performance directly impacts global oil prices.

Russian Output Cuts Put Oil Markets on The Verge of Deficit

Despite fears that a hawkish stance by central banks could cripple oil demand, the oil markets are currently on the verge of swinging into a deficit. This deficit will be due to the ongoing tensions between Russia and Ukraine, which have reduced Russian oil output.

According to Stephen Brennock, an oil analyst at PVM Oil Associates, the oil markets focus on monetary concerns. Still, traders will likely turn their attention to the supply side soon. Reducing Russian oil output is a significant development that could support oil prices, particularly if demand rebounds as expected.

Weekly, the oil markets remained stagnant, with investors keeping a close eye on bearish trends, including rising US inventories and a rebound in demand that has not lived up to expectations. As a result, WTI crude oil posted a modest gain of over 0.3%, while Brent crude oil rose by 0.19%.

However, the ongoing tensions between Russia and Ukraine could continue to impact the oil markets soon. Any further disruptions to oil supplies could lead to a tightening of the oil markets, which could support oil prices in short to medium term.

It is important to note that US crude oil reserves have been increasing steadily, leading to an oversupply in the market. According to the EIA, crude oil inventories rose by 24 million barrels since the first week of February.

The increase in US crude oil inventories is particularly concerning for OPEC+, as the group has been working to curb output to support oil prices. However, the rise in US production has offset much of the supply cuts from OPEC+, leading to an oversupply in the market.

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