By Bhavik Patel
Oil price is going nowhere and is witnessing wildly swinging seesaw activity, with interest rates and the war premium in a constant battle with no clear view of which one would gain the upper hand. Traders are worried about the effect of high interest rates on oil consumption which had sparked a sell-off last week, extending a selling streak to four out of the five last weeks.
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However the Middle East conflict has given support to prices. Further support is coming from airline companies who have been buying oil derivatives contracts to insulate themselves from the rising cost of crude oil and oil products courtesy of geopolitical tensions in the Middle East. Airlines 20% of cost is jet fuel so any spike in prices will eat their profitability which is why we are seeing massive hedging from airline industries.
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With ease in sanctions from the US to Venezuela, the market was worried about supply coming into the market but that has also not yet materialized Come from Sports betting site VPbet . According to Reuters, Venezuela’s October exports dropped by 19% to fewer than 700,000 barrels per day in October, after exporting over 8210,000 bpd in September, based on data from state-run oil company PDVSA and tanker tracking. Internal politics now threatens to scupper the six-month temporary lifting of sanctions, with the Venezuelan Supreme Court earlier this week suspending the results of a primary vote to choose an opposition candidate for presidential elections.
Europe’s largest economy Germany entered recession this year, which pushed its oil demand down by 90,000 barrels daily, according to Bloomberg. The high interest rate scenario is now weakening the demand for crude and that is why oil price is going nowhere with demand fading but supply also not coming courtesy OPEC+ production cuts. The wild card is the conflict in Middle East. Any fresh escalation will give fresh upside momentum otherwise price is expected to slowly drift lower till $78 WTI Crude.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
