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On September 7, OPEC+ agreed to increase production again in October. Amid weakening global demand, the Saudi-led OPEC group is pressing ahead with a six-month plan to regain market share. This decision will put pressure on oil prices, further confirming that Saudi Arabia has given up on pursuing higher prices and is focused on increasing revenue by restoring as much idle production as possible. Eight OPEC members, including Saudi Arabia, Iraq, and the UAE, said they will increase production by a total of 137,000 barrels per day next month. However, analysts say only Saudi Arabia and the UAE will be able to increase supply because most other members are already close to their production capacity limits. People familiar with the matter said that for Saudi Arabia, the political and economic costs of maintaining production cuts are too high. By quickly restoring production, Riyadh will also be able to assess the production capacity of each member country for possible future renegotiation of quotas.With a September Federal Reserve rate cut all but certain, options traders are widely betting on a stable stock market ahead of Thursdays CPI data. However, this bet could be risky if the data shows rising inflation. The markets rationale for a rate cut is straightforward: US job growth is stagnant and the economy needs stimulus. Fridays weak jobs data reinforced this expectation, prompting investors to fully price in a 25 basis point rate cut from the Fed next week. The markets reaction has been muted: US stocks fell slightly on Friday, and the fear gauge edged up slightly, but remains well below the critical 20 level, where it has mostly remained since June. Looking ahead, options traders are betting on a roughly 0.7% two-way move in the S&P 500 following Thursdays CPI release, below the 1% average realized move over the past year. However, this trade ignores a key risk: what if inflation figures significantly exceed expectations? "Its a very delicate balance right now," said Eric Teal, chief investment officer of Comerica Wealth Management. "Any data thats very positive or very negative could change the market outlook."On September 7, U.S. Treasury Secretary Jeffrey Bessant stated that the United States and Europe are discussing a new round of sanctions and secondary tariffs against Russia, hoping that the "collapse" of the Russian economy will prompt Putin to engage in peace talks with Ukraine. "We are ready to increase pressure on Russia, but we need the cooperation of our European partners," Bessant said. He also stated that President Trump and Vice President Cyril Vance spoke with European Commission President Ursula von der Leyen on Friday, and that von der Leyen subsequently discussed sanctions with Bessant.Israel Airports Authority: The first flight from Ramon Airport to Tel Aviv will take off soon.Russian Deputy Prime Minister Novak: OPEC+s production increase plan is beneficial to the Russian economy.

Oil Settles Close to Unchanged; Recession Fears Compete With Expectations of Rising Demand

Aria Thomas

May 24, 2022 09:20

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Oil prices were little changed on Monday, settling only marginally higher as concerns about a future recession competed with an anticipation for stronger fuel demand with the forthcoming U.S. summer driving season and Shanghai's preparations to reopen following a two-month coronavirus lockdown.


WTI crude closed up 1 cent, or 0.01 percent, at $110.29 per barrel, while Brent crude futures settled up 87 cents, or 0.7 percent, at $113.42 per barrel.


According to Bob Yawger, director of energy futures at Mizuho, "dark clouds are forming around the financial markets, and this has begun to affect crude oil."


"The economic health of the global economy is currently uncertain," he continued.


Multiple dangers to the global economy topped the concerns of the wealthy at the annual Davos economic forum, with some highlighting the possibility of a global recession.


Kristalina Georgieva, managing director of the International Monetary Fund, stated that she did not anticipate a recession for big economies but could not rule one out.


Oil's declines were mitigated by forecasts that gasoline demand would remain elevated. The peak driving season in the United States was expected to begin on Memorial Day weekend at the end of this week.


Analysts reported that mobility data from Tom and Google (NASDAQ:GOOGL) has increased in recent weeks, indicating more drivers on the road in locations such as the United States, despite concerns that rising fuel prices could dampen demand.


An administration official stated that the White House is considering declaring a state of emergency in order to release diesel from a stockpile that is infrequently utilized in order to alleviate a severe supply shortage and stem the rise in costs.


The White House is contemplating utilizing the Northeast Home Heating Oil Reserve, which was established in 2000 to assist with supply shortages and was only utilized once in 2012 in the aftermath of Hurricane Sandy. The impact of such a discharge would be limited due to the reserve's modest size, which stores only 1 million barrels of diesel.


The inability of the European Union to get a definitive agreement on an embargo on Russian oil following Russia's invasion of Ukraine, which Moscow refers to as a "special operation," has curbed oil price increases. Hungary continues to oppose the proposed prohibition, assuring that there will be no unexpected supply disruption.


According to Jeffrey Halley, a senior market analyst at OANDA, the chronic shortage of refined petroleum products in the United States and the ever-present Ukraine/Russia danger supported prices.


Shanghai, China's economic capital, hopes to return to normal on June 1 as coronavirus cases fall.


Lockdowns in China, the world's largest oil importer, have crippled industrial output and construction, forcing measures to bolster the economy, including a larger-than-anticipated reduction in mortgage rates on Friday.


Monday's cabinet statement was cited by state television as saying that China would take targeted measures to help its economy, including expanding tax credit rebates and launching new investment projects.

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