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With Tight Oil Supplies the Economy is Getting Rusty
16.08.2022

The price of the US Dollar continues to increase as we edge closer to the Fed’s Meeting Minutes report. Upcoming speeches from FOMC’s members will also be influential. Most economists have advised that the Fed is likely to potentially refrain from a 75 basis point increase but not cease to alter the monetary policy. This is also something which most of the FOMC members have advised. According to experts, the Federal Reserve may opt to change the regulator’s inflation target temporarily to 3% but even with such a move, a much higher fund rate is required to lower demand and inflation.

The price of crude oil has increased over the past hour by 1.48% after a failed attempt to decline earlier this morning. Crude and Brent are not the only commodities seeing an increase. The price of Gas has also increased, specifically within the European Union. This has also resulted in the price of the Euro struggling. According to the latest data, the price of gas within the EU has increased by 8.7% and is more than 12 times higher than the seasonal average. As prices increase significantly in Europe, bankers are contemplating whether the European Central Bank will again increase by 50 basis points on the 8th September.

Crude Oil

The price of crude oil is interesting, with a strong price movement this morning which took the price to its highest point in 24 hours. The price had originally attempted to decline further downward, declining to $87.26 before seeing a quick surge in buyers. It should also be noted that the price of $87 has also repeatedly acted as a support point since the 4th August. The support level has been triggered on 6 occasions since the 4th.

The price movement has moved into the positive zone of the EMA regression channels but is yet to cross over above the negative zone. Most moving averages have also crossed over upwards but the price is yet to pass the 100-day moving average which currently sits at $90, a major psychological price for the market. Today’s bullish candlestick currently measures 2.30% but remains $1.82 below yesterday’s open price.

USOUSD - 16.08.2022.png Crude Oil 1-hour price chart on August 16th.

According to this morning's report from Bloomberg, the volume of crude oil transported by sea from Russia decreased to 3.24 million barrels per day from 3.32 million. Similarly, exports to Asian countries decreased to 1.75 million barrels per day from 2.1 million. The Asian markets saw a larger decline even with no sanctions in place. According to experts, this is due to Asian countries purchasing almost 16 million barrels of American oil at a cheaper price.

All the above support the price of oil and most economists do agree that there is a high risk of seeing another strong bullish trend in prices at some point this year. However, there are also influential elements which have pressured the price of Oil. For example, this week’s poor economic data comes from China which is the largest importer of oil and also economic data from other countries. If the economic data continues to deteriorate the demand for the asset, it may decline.

GBP/USD

The price of the GBP/USD continues to remain under pressure from economic statistics being released from the UK. The price declined for the fourth consecutive day but has witnessed some minor bullish price movement making traders wonder how stable the price is before clarification from the Fed.

GBPUSD - 16.08.2022.png GBP/USD 30-Minutes price chart on August 16th.

No major economic news is expected to be released today for the US, but plenty from the UK. The only good news from the UK government is that the nationwide Unemployment Rate has not declined and has remained at 3.8%.

Data from the UK government confirmed that in the last 3 months the underlying real wages fell 3% which is the highest decline since records began in 2001. Of course, the main reason for the decline is due to regular pay increasing by 4.7% which is dwarfed by prices rising at a much faster rate. This is likely to eat into disposable income which will lead to less being spent. The domino effect can of course lead to a recession as debt becomes more expensive alongside necessary goods and services.

Key Takeaways:

  • The UK’s Real Wages decline at the highest level since 2001
  • USD increases again for the fourth consecutive day
  • Oil purchases decline once again
  • Economic data worries traders and the global economy tips towards recession
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