FXTM Research Analyst
It has been a rollercoaster trading
week for oil markets as investors tussled with conflicting fundamental themes
pulling and tugging at the commodity.
Oil prices initially collapsed roughly
4% mid-week thanks to an unexpected rise in US crude stockpiles and gloomy
outlook for global oil demand. Bulls were later thrown a lifeline after
geopolitical tensions in the Middle East rekindled concerns over potential
supply shocks. Oil markets are poised to remain highly sensitive and reactive
to supply and demand side factors ahead of the OPEC meeting this month. With
oil trading at depressed levels despite the recent rebound, OPEC+ may have no
other choice but to extend supply cuts in an effort to prevent any further
downside shocks.
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For as long as Nigeria remains reliant
on oil sales as a source of growth, the weakness in oil exposes the nation to
significant downside risks. Should oil prices sink deeper into the abyss,
Nigeria’s fragile recovery, exchange rate stability and improving sentiment
will be under threat.
Looking at the technical picture, WTI
Crude is trading marginally below $53.00 as of writing. Repeated weakness below
this level is likely to encourage a decline towards $52.00 and $50.60.
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Dollar steady ahead of retail sales
The Dollar edged higher against a
basket of major currencies today as trade tensions and global growth concerns
supported the flight to safety.
While the Dollar is likely to remain
supported by safe-haven flows amid persistent trade tensions, the question is
for how long? With the Fed speculated to cut interest rates and recent economic
data from the United States nothing to celebrate about, the Dollar is running
on borrowed time. Much attention will be directed towards the latest US retail
sales figures on Friday which should offer insight into the health of the US
economy. Should the report disappoint, the Dollar is likely to weaken as
expectations mount over the Federal Reserve cutting interest rates this year.
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Commodity spotlight – Gold
This has been a mixed trading week for
Gold due to the growing sensitivity of global risk sentiment. The precious
metal has the potential to conclude the week on a positive note if the pending
US retail sales report fails to hit market expectations. Looking at the
technical picture, Gold is likely to test $1347 if $1324 proves to be a
reliable support.
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