Oil prices retreat after shooting up to the highest level since the December 2015. On Thursday, during the New-York session, WTI surged to the $40.54 level, while Brent hit a yearly peak of $41.68. The growth was largely associated with the weak US Dollar. The Fed’s commentaries on the monetary policy sent the USD into a steep decline against all majors as well as commodities, the hunger for risk was higher than ever.
During the Friday London session, crude benchmarks pared down gains, Brent declined 0.8% to $41.20 level while its US peer dropped 0.50% stopping around the $40.00 mark. The pullback reflects profit-taking after conquering an important key level, as the hyped growth is said to have no fundamental reasons – the glut still pressures the energy market.
There is a different point of view on the price growth though. According to the Wall Street Journal, the global oversupply may simply be the statistics slip, and the Oil market is now in an undervalued position rather than overvalued. As far as counting Oil reserves, or supply and demand on the energy carriers is not an exact science because of limited information access (exact reserves of some non-OPEC countries, estimated supplies on the black market, inaccurately accounted reserves in China, inaccuracies in energy needs of some countries, etc), the surplus evaluation may be bogus and bloated by speculations as well. The price recovery can happen faster than expected, returning the market to balance.
Oil traders today may be waiting for a weekly Baker Hughes release to see how many Oil rigs were stopped this week. The change in the Oil rig count in the US reflects how crude production in the US changes and serve as a leading indicator on the Oil market.
Fueled by the Oil growth and renewed risk appetite, the majority of European shares feels better today. FTSE 100 rose by 0.31%, DAX gained 0.23%, Euro Stoxx 50 added 0.34%, mining companies, pharmacies and banks are top performers. Japanese indices extend their declines for the fourth trading day in a row, with Nikkei 225 dropping by 1.25%, and Topix declining by 1.02%. Topix is said to be the worst performing index in the developed countries. Hang Seng gained 0.82%, Chinese CSI 300 extended its gains for the 8th consequent day, adding 1.53%, as new visionary leadership of the Chinese stock regulator succeeds in bringing the investor confidence back to Chinese equities. The Asia Pacific index advanced by 2.11%.
The US Dollar recovers losses against all majors, with EUR/USD dropping by 0.36%, GBP/USD losing 0.29%, AUD/USD declining by 0.34%, USD/CAD adding 0.25%, and USD/CHF gaining 0.27%. The Ruble surrenders its gains after hitting its December 2015 peak, declining by 0.73% against the US Dollar to 68.60 level.
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