Fri, December 01, 2023

Oil and Gold Prices Steady Amid Signs of Financial Crisis

Global Financial Crisis: Newspaper headlines financial crisis.

On Thursday, a sharp overnight loss occurred as U.S. crude inventories unexpectedly rose, oil prices firmed.

It was after fears of recession or global financial crisis intensified and economic data out of China and Europe disappointed.

Brent crude was down 13 cents, or 0.2%, at $59.35 a barrel, after plunging 3% in the last session.

U.S. crude strengthens 5 cents, or 0.1%, at $55.28 a barrel, having a fall of 3.3% in the previous session.

The combined data represented a signal for a global financial crisis.

It is amid the U.S.-China trade war and persistently high levels of oil in U.S. storage that recent optimism in the crude markets weakened.

Expectations were strengthened as leading producers may take further steps to support prices.

An analyst at Phillip Futures in Singapore, Benjamin Lu, stated, “Oil prices, though supported by OPEC-led production curbs.”

In addition, “It has faced severe headwinds as traders swing between demand-side worries and supply curtailment policies.”

The Organization of the Petroleum Exporting Countries (OPEC) is the one mostly cutting down the productions.

It was since the start of 2017 and traders indicate they suppose Saudi Arabia to lessen output further amid slowing global oil demand.

Meanwhile, on Wednesday, the U.S. Treasury bond yield curve inverted for the first time since 2007. A sign for investor’s concern that the world’s biggest economy may tumble into recession.

Further Global Economic Uncertainties

In a news report, China cited disappointing data for July.

The report includes an unexpected drop in the industrial output growth to a more than 17-year low. It is underlining the widening economic cracks as the trade war with the U.S. deepens.

Global economic worries were amplified by tariff wars and uncertainty over Brexit. It is also hitting European economies.

In the second quarter, a fall in exports put Germany’s economy into reverse as data showed. Meanwhile, the euro zone’s GDP barely rose in the second quarter of 2019.

The unexpected builds in U.S. crude inventories are now on its second week, and it is adding to the pressure on oil prices.

Last week, according to the Energy Information Administration (EIA), the U.S. crude stocks increased by 1.6 million barrels.

This is in contrary to the analyst expectations of a 2.8 million decrease of barrels after refineries cut output.

The EIA also said, at 440.5 million barrels, inventories were about 3% above the five-year average for this time of year.

Gold Prices Rebound after Stock Market Drops

Elsewhere in commodity trading, gold prices showed some safe-haven demand and rebounded in Asia. It was after global stock markets declined on Thursday.

December delivery of gold futures traded on the Comex division of the New York Mercantile Exchange gained 0.2% to $1,530.95.

Global markets weakened after the yield on the 30-year U.S. bond hit an all-time low.

Meanwhile, marking fresh record lows in the negative territory are the yields on the German 10-year bund and the French 10-year OAT.

A global markets analyst, Jesse Cohen, stated, “the last three times (the yield curve inverted), U.S. recessions soon followed.”

Lower yields lessen the opportunity cost of holding the non-yielding precious metal, making them beneficial to gold.

Hong Kong’s political unrest also contributed to the gains in gold.

According to reports, the succeeding months of protests versus a planned extradition bill made several Chinese firms to reassess raising of funds in Hong Kong.


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