Market Reviews

What’s wrong with oil?



Oil rose along with stocks on Friday but remained lower for a third week in a row on rising concerns about global demand and the end of the war risk premium between Israel and Hamas.

West Texas Intermediate crude rose steadily for most of Friday’s session and settled above $77 a barrel, up 1.9%.

Financial markets generally recovered from comments from Federal Reserve Chairman Jerome Powell that officials would not hesitate to tighten policy further.

Traders also shrugged off weak US consumer sentiment data, which showed long-term inflation expectations had reached a 12-year high.

However, concerns about declining demand and increasing supply are leading to long-term declines in oil prices.

“The futures market appears oversold,” Royal Bank of Canada analysts including Michael Tran wrote in a note.

“While oil prices may have near-term, asymmetrical upside potential, increasing concerns about slowing demand may be enough to dampen enthusiasm for a significant rise in oil prices in the coming weeks.”

In simple words, gentlemen, according to market laws, any asset cannot grow or fall all the time; there are so-called corrections.

Now, significant oil growth may be limited by the most important factor – a slowing global economy and rising inflation. All ups against a downward trend are just a short-term factor in internecine wars.

Yes, Russia and Saudi Arabia may intervene and reduce production even further, but, in our opinion, the bottom of the reduction has already been reached.