Reasons for the end of rise in Oil prices
2022.12.22 13:39
Reasons for the end of rise in Oil prices
Budrigannews.com – Oil’s three-day rally came to a halt on Thursday due to weather forecasts suggesting that the initially anticipated freezing temperatures for the Christmas weekend may be postponed, decreasing the likelihood of a spike in heating oil demand.
Both the ECMWF, which is the default version used for Europe, and the Global Forecast System, which is the weather forecasting model that is preferred for the United States, are predicting cooler temperatures beginning next week that could last into the first week of January. That contrasts with the extremely low temperatures predicted by the two models for this Friday through the end of the year.
A surprisingly good 3.2% development in , or Gross domestic product, for the second from last quarter – – versus figures for a 2.9% extension – – likewise took rate climb worries back to the market’s very front.
After a contraction of 1.6% in the first quarter, GDP expanded only 0.6% annually in the second quarter, making the growth in the third quarter more significant. Rather than a sign that the United States was headed for a recession, economists saw it as evidence that the country was on solid ground. Typically, negative growth for two consecutive quarters indicates a recession in an economy.
The stronger performance also indicated that the Federal Reserve will likely continue at the pace it has established since the first quarter to rein in inflation, which reached 40-year highs in 2022. The most recent GDP reading was welcome news for financial markets.
Today, the Fed and the weather are to blame; John Kilduff, a partner at the energy hedge fund Again Capital in New York, stated, “those two are weighing on oil.”
By 12:55 ET (17:55 GMT), U.S. crude for delivery in February was down $1.01, or 1.3 percent, to $77.28 per barrel. WTI, as it is known, reached an intraday high of $79.88 earlier. For the week, the U.S. unrefined benchmark was still up 4.4%, totally finishing last week’s 4.1% addition. WTI fell 11% the week before, reaching a low of $70.11, the lowest level since December 21, 2021.
Crude from the UK that was scheduled to be delivered in February was $80.97 per barrel, down $1.23, or 1.5%. Brent reached a session high of $83.86 earlier. However, the global crude benchmark was up 2.4% for the week, up from 4% the previous week. Brent fell 11% in the previous week to a low of $75.14, a low not seen since December 23, 2021.
Ed Moya, an analyst at the online trading platform OANDA, stated, “Crude prices are wavering as it’s been quiet on the macro front.” We aren’t really seeing any exciting moves, so energy traders seem ready for the holidays.
“WTI crude appears to have a floor at the $70 level, initial resistance at the $80 level, and major resistance in the $83.50 region,” according to the report.
As traders took note of forecasts indicating there will be a pre-Christmas warming in weather rather than a major Arctic blast that was expected to dominate much of the United States over the next few days, the drop in crude oil coincided with its fall from its highs. After rising to $3.2182 earlier, heating oil now costs $3.1365 per gallon.
On the economic front, Friday’s GDP growth for the third quarter came a day after a U.S. index gauge rose from 101.4 in November to 108.3 in December. The U.S. economy is made up of about 70% consumer spending, which is often a sign of inflation.
The Consumer Price Index (CPI) measures inflation in the United States and rose by 7.7% from June to October, its slowest rate in nine months after reaching a four-decade high of 9.1%.
After the Federal Reserve increased interest rates by 375 basis points since March, the CPI decreased. Prior to that, the central bank slashed rates to nearly zero after the global COVID-19 outbreak in 2020, when they peaked at just 25 basis points.
Inflation remains more than three times higher than the preferred levels preferred by the central bank, which has pledged to return it to its 2% target despite such aggressive rate hikes.
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