Oil responds negatively situation in Europe is deteriorating


Oil responds negatively situation in Europe is deteriorating

Oil responds negatively situation in Europe is deteriorating: Oil responds negatively to the opportunity to sell strategic stocks by the United States and China The epidemiological situation in Europe is deteriorating

It seems that the news of Covid-19 will return to the markets, especially after the infections have increased dramatically in Germany, and Austria has taken strong action to contain the virus. 

Evest follows the impact of this news on markets in the following report.


American and European statements on inflation

Lockdowns in Europe

Oil continues to decline sharply in conjunction with the decisions of the United States and China

Nationwide Ban In Austria

The core US price


American and European statements on inflation

The Chairman of the Federal Reserve Bank (FRB) in Chicago, Charles Evans, said this week that inflation in the United States was more flexible than expected.

 “Now I have to admit that this has been going on longer than I expected,” Evans said in an interview in America.

In the meantime, Meanwhile, New York Fed Chairman John Williams spoke on the eve of that statement, defending the Fed’s new inflation strategy, which,
according to its critics, prevents the Fed from taking clear action to curb inflation in the United States. 

In the meantime, ECB President Christine Lagarde said that the ECB should not rush to tighten monetary policy, even to counter “unwanted and painful” inflation.

“We understand that high inflation limits the population’s real income, especially those with low incomes,” she said.

However, the main drivers of inflation, namely supply chain problems, and rising energy prices would decline in the medium term.

“We should not delve into tightening policies when faced with inflationary shocks caused by supply chain problems,” Lagarde said.

It’s going to have negative consequences for the economy.

Consumer prices in the eurozone rose in October by 4.1% on an annual basis – the highest rate since 2008.

However, the European Central Bank considers the inflation increase to be temporary and expected to weaken in 2022.

The new wave of COVID- 19 in Europe, along with the introduction of new closures,
has had a negative impact on the mood of global investors and their willingness to take risks.


Lockdowns in Europe

On Friday, the Austrian government announced a ten-day shutdown in the country, which could later be extended for another 10 days.

Austria became the first European country to impose travel restrictions on people who have not been vaccinated against COVID-19.

The Republic has the lowest vaccination rate in the region – 65%.

The country’s Minister of Health, Jens Spann, also did not rule out the possibility of a nationwide ban.

The situation is now riskier than it was a week ago, according to Spahn. Earlier this week,
Germany surpassed the record number of daily cases – over 65 thousand people.


Oil continues to decline sharply in conjunction with the decisions of the United States and China

The decline in benchmark crude oil prices accelerated during Friday evening’s trading.

The oil market continues to respond to news that the US and China are willing to start selling raw materials from strategic reserves,
although experts warn that freeing oil from the reserves of leading countries will have only a temporary effect.

January Brent oil futures’ prices on the London Stock Exchange ICE Futures fall by $2.65 to $ 79.08 per barrel on Friday.

Price of WTI oil futures for January on electronic trading

The New York Mercantile Exchange (NYMX) fell by 2.67% – to $76.32 per barrel.

Additionally, the market is concerned about a new wave of Covid-19 occurrence in Europe,
as well as the introduction of new closures, which may affect energy demand.

Brent crude prices fell by more than 2% in value, and also fell below $ 78.2 per barrel during Friday, having renewed their minimum since October 1 of this year. 

The deterioration of the epidemiological situation in Europe, in particular,
caused oil to decline in addition to the reasons mentioned above.

Nationwide Ban In Austria

Austria announced a nationwide ban, the German Ministry of Health announced similar plans,
and Norway tightened restrictions on those entering the country. 

The news of total quarantine in Austria has led to a total logical decline in oil. 

If Germany and a number of other countries take similar measures, Brent prices could lose another 5-10%. 

The market is also under pressure from expectations that the United States and China will start selling oil from strategic reserves.

There is still no direct news about the sales, although the expectations themselves are based on them.
The accelerated growth rate of the US core consumption index
Regarding corporate reports, there will be no particular surprises in the United States: 90% of companies already reported and 80% managed to exceed Wall Street’s profit expectations. 

Basically, the first half of next week will be eventful, and then American investors will head to Thanksgiving on Thursday. 

The core US price

The growth rates of the core US price consumption index (the Fed’s preferred inflation index) accelerated in October, according to average estimates,

from 0.2% on a monthly basis to 0.4%, increasing the risk of tightening the Fed’s tone at the December meeting. 

It may have a negative impact on morale in general (statistics are scheduled to be published on Wednesday).

Meanwhile, one of the most urgent threats to the oil market remains the implementation of strategic reserves in the United States and Asian countries,
or at least other calls by US authorities to reduce gasoline prices.

In addition, Covid- 19 again topped the news because of the seasonal increase in cases.

It should be noted that, with regard to important aggregate data, the United States PMIs will be published next week,
which may add a positive feeling in the context of a more confident economic recovery. 

The US GDP for the third quarter will also be published: Above-expectations growth may pressure US Treasury prices because of a reduced need for excessive stimulus to the economy. 

The minutes of the Fed’s weekend meeting will also be released, where it will be interesting to know what members of the Fed think about supposed inflation growth in the United States, calculated using government bond returns.