The main story of last week was Oil’s third consecutive week of price depreciation, and this morning it continues to worsen for high oil exporting countries. Today, the price declined to $73.62 which is the lowest price we have seen in almost 11 months. The price of oil has mainly been influenced by the rise in COVID-19 cases in China, local restrictions and the slowing global economy.
The US Dollar Index on the other hand slightly increased in value, climbing to above 106.00, but soon after declined again. The index has increased by 0.14% during this morning’s Asian Session and has increased in value for 3 consecutive days. However, technical analysts are advising the price movement in favor of the Dollar remains uncertain due to strong corrections. Whereas, normally a trend would see only a few corrective waves, and normally they are quite weak compared to the impulse swings. Currently, the price movement of most major currency pairs has formed a retracement against the US Dollar.
During this morning’s Asian Market, equities have mainly opened on a bearish price gap measuring 0.39% on average. The price action of indices since the market gap have been “mixed” depending on the instrument. Some indices have continued to decline, such as the NASDAQ, while others have almost fully corrected, such as the DAX.
Lastly, Gold this morning has increased in value but remains within a “lower low”. According to the latest report from the CFTC, the amount of speculated positions in Gold have increased by 34% compared to the previous week. Sellers currently still hold the lead over buyers with a 2:1 ratio in the US.
Crude Oil
The price movement this morning continues to move within a clear downward trend. The latest bearish impulse wave formed at the start of the US trading session on Friday, but continued for the first 7 hours of this morning’s Asian session. The price movement has also managed to cross the previous support levels formed on the 21st and the 23rd. The price at the start of the European session is mainly moving sideways, but continues to obtain downward signals from indicators.
The downward price movement escalated after the Chinese government continued to impose restrictions such as closing schools, mass testing, and closing factories. The number of COVID-19 cases remains high and actually increased for 3 consecutive days. The price movement also came under strain from mass demonstrations against measures being placed by the government.
Investors were also specifically concerned about the state of the Chinese economy, which has already slowed. The price has been influenced by a decline in economic activity everywhere, but specifically within China. The concern is that restrictions and demonstrations may further fuel the decline.
Some industries have only seen a slight decline, whereas others, such as the real estate market, have significantly declined. The Chinese government has altered their fiscal policy through loosening regulations, capital controls and budgeting to support the Chinese economy. However, this would be in vain while restrictions are being imposed.
Even though the price is clearly in a downward spiral, traders should still be cautious of a change in the trend. The price may still be supported by a surge in buyers looking to take advantage of the discounted price and lower value of the US Dollar.
In addition to this, the price may be supported by price caps being placed by the G7 and potentially the EU. Lastly, traders are eager to see how OPEC will respond to the lower price next week during the last OPEC meeting of 2022.
Summary:
- The price of Crude Oil declined to $73.62 which is the lowest price we have seen in almost 11 months.
- Investors remain bearish due to China demonstrations and restrictions, as well as the weakening of the Chinese economy.
- Global stocks open on a bearish price gap, but many indices attempt a full price correction.
- Markets are eager to see how OPEC will respond to the lower oil price next week during the last OPEC meeting of 2022.
