Sanctions against Russia could not oil prices rose
2022.12.05 13:26
Sanctions against Russia could not oil prices rose
Budrigannews.com – Although the price cap on Russian oil in Europe and the ban on Russian oil in Europe may dominate headlines, data from the U.S. services sector and factory orders seems to be deciding where crude prices should end the day.
After rallying almost 3% earlier on a slew of headlines about how the West’s clampdown on Russia could seize oil markets, New York-traded West Texas Intermediate, or WTI, and London’s Brent were both down more than 1% in early afternoon trade on Monday.
Dmitry Peskov, a spokesman for the Kremlin, stated that Russia “will not accept” the $60-per-barrel cap on its oil and is considering how to respond. Peskov added that the cap would not affect Moscow’s ability to maintain what it calls its “special military operation” in Ukraine, but it would destabilize global energy markets.
To give you some context, the Group of Seven countries’ price cap will allow countries that are not members of the European Union to continue importing seaborne Russian crude oil. However, shipping, insurance, and reinsurance companies will not be able to handle cargoes of Russian crude around the world unless they are sold for less than $60.
Even to nations that are not a part of the agreement, this could make it more difficult to ship Russian crude at a price that is above the cap. On Friday, the price of a barrel of Russian Urals crude was approximately $67.
However, in response to the ire of the Kremlin, the White House suggested that WTI and Brent will eventually change to the benefit of countries that consume them.
John Kirby, White House coordinator for strategic communications at the National Security Council, stated, “We believe that the oil price cap will have no long-term impact on global oil prices.”We are sure that this price cap will keep the Russian oil discount.
By 12:45 Eastern U.S. Time (17:45 GMT), the price of a barrel for January delivery had fallen $1.48, or 1.9%, to $78.50 from $82.71 earlier.
After a session high of $88.43, crude for February fell $1.42, or 1.7%, to $84.15.
After U.S. orders increased by 1% in October, oil fell while the recovered for the first time in four sessions. According to a measure from the Institute for Supply Management (ISM), this was the 12th increase in 13 months for factory orders in comparison to, which contracted in November for the first time in two and a half years.
Separately, on Monday, the ISM-tracked sector reported a reading of 56.5, up from 54.4 in October.For the previous month, economists had anticipated a reading of 53.3.
“Times are extreme for estimating the U.S. economy,” financial specialist Adam Button said in a post on the ForexLive discussion. “
There were two reports on the service sector in the United States within 15 minutes;One showed an economy accelerating, while the other stated that the U.S. economy was contracting at a rate of one percent.
The idea is that rates in the United States might not be at their highest point right now. Button stated, “The Fed is going to pause at some point next year around 5%, but they won’t pause for long if the numbers keep running hot like this.”
The concern is that rates of 5% won’t be enough, and the Federal Reserve will eventually need to raise rates to 6-7% or higher. The problem is that we really don’t know how the economy of the United States will react to those rates then. It’s hard to say because it’s been so long since the United States had truly high rates.
Since March, the Fed has raised rates by 375 basis points.Prior to that, rates reached their lowest point of 25 basis points when the central bank cut them to almost zero following the global coronavirus pandemic in March 2020.
Markets anticipate that the Federal Reserve will impose a smaller increase of 50 basis points on Dec. 14, following four consecutive jumbo-sized hikes of 75 basis points between June and November.
