At the beginning of the Asian market on December 9 (Friday), U.S. oil traded around $72/barrel; oil prices closed lower for the fifth consecutive trading day on Thursday, and Keystone, an important U.S.-Canada oil pipeline, is expected to resume operation, which will lead to a large amount of crude oil Back in markets, fuel demand weakened amid the prospect of further rate hikes in the US, with the Fed widely expected to raise rates by 50 basis points next week.
During the day, pay attention to the annual rate of PPI in November in the United States and the final monthly rate of wholesale inventories in the United States in October.
Bearish factors affecting oil prices
[Keystone, an important oil pipeline between the United States and Canada, is expected to resume]
The Keystone pipeline, the main oil pipeline in the Gulf of Mexico between Canada and the United States, was shut down due to the oil spill. Pipeline operator TC Energy said the spill was located about 20 miles south of Steele Cityl, Nevada, and the affected area had been isolated as crews worked to contain and recover the spilled oil. The Crude Oil Transport Capacity of the Keystone Pipeline System exceeds 600,000 barrels per day.
U.S. crude oil inventories at Cushing are now at their lowest level since July. Crude oil processing at refineries in the Midwest is at the highest level in months, and crude supplies could be very tight amid key pipeline closures. Pipelines are expected to be shut down for days, traders said, as spilled crude flows into waterways. TC did not provide an estimate for the amount of crude oil spilled or when the pipeline will restart.
“I’m inclined to think that any time from now we could see news that the Keystone pipeline will be back up and running as soon as possible,” said Bob Yawger, director of energy futures at Mizuho Bank.
[The probability of the Federal Reserve raising interest rates by 50 basis points in December is 79.4%]
According to CME “Fed Watch”, the probability of the Fed raising interest rates by 50 basis points in December to the range of 4.25%-4.50% is 79.4%, and the probability of raising interest rates by 75 basis points is 20.6%; The probability is 44.4%, the probability of a cumulative rate hike of 100 basis points is 46.5%, and the probability of a cumulative rate hike of 125 basis points is 9.1%.
[The United States is expected to fall into a technical recession]
In recent weeks, many commentators have said that the prospect of a soft landing for the U.S. economy is still possible, but we don’t think that’s the case, Eric Mu, head of products and investment strategy at international investment firm Muzinich & Co, said in a note. will happen. The firm expects economic resilience to support higher interest rates for an extended period, and sees a technical recession in the U.S. likely in the second half of 2023. This is due to the lag between the monetary policy adopted and the resulting impact on the economy, which means we may not yet pay for the decisions made in 2022.
[European energy giants reduce investment, test windfall profits tax in European countries]
Germany’s “Welt” reported on the 7th that five states, including Bavaria and North Rhine-Westphalia, led by the German opposition coalition party, mediated the so-called windfall tax issue to the Bundestag and the Bundesrat on Monday. The committee appealed, arguing that there were constitutional problems with the introduction of the windfall profits tax. Coincidentally, the head of production of the French oil company Total said on December 2 that after the British government raised windfall profits tax on the industry, the company decided to cut investment in the UK North Sea oil and gas project by a quarter next year. Statoil and energy giant Shell also said they were reviewing their UK investment plans. The negative impact of windfall profits tax in European countries has already begun to appear.
Bullish factors affecting oil prices
TC Energy halts oil pumps due to Nebraska oil spill
TC Energy said on Thursday it had halted delivery of oil from the 610,000 bpd Keystone pipeline after an oil spill was discovered in Nebraska, U.S. The emergency shutdown occurred around 8:00 p.m. local time on Wednesday after alarms were sounded after a drop in pipe pressure was detected. The affected section of the pipeline has been isolated and booms have been deployed to control the migration of the leak downstream.
[U.S. labor market remains tight and strong]
The number of Americans filing new claims for jobless benefits rose only marginally last week, suggesting that despite mounting recession fears, the labor market remains tight and strong as the Federal Reserve struggles to curb demand. Initial claims for state unemployment benefits rose by 4,000 in the week ended Dec. 3, in line with economists’ expectations. The seasonally adjusted 230,000 was well below the 270,000 threshold. While continuing jobless claims rose to a 10-month high, economists cautioned against reading too much into the move because data is volatile at this time of year.
[The S&P 500 and the Nasdaq closed up and ended their losing streak, inspired by unemployment benefits data]
The S&P 500 index of U.S. stocks closed higher on Thursday, ending a five-day losing streak, as data on the number of Americans filing new claims for unemployment benefits last week was interpreted by investors as a sign that the pace of interest rate hikes may slow soon.
Major U.S. stock indexes have come under pressure in recent days, with the S&P 500 down 3.6 percent since early December on expectations of a longer rate hike cycle and pessimistic views on the economy from some company executives.
The Nasdaq was also weighed down, having fallen for four straight sessions before rising on Thursday. Data on Thursday showed initial jobless claims rose slightly last week, while continuing claims hit a 10-month high in late November. The data boosted investor confidence and drove the stock market higher.
Prior to this, data released on Friday showed that the United States added more jobs than expected in November and wage growth accelerated, raising concerns that the Fed may stick to its aggressive stance on raising interest rates.
The market has been swayed by data news in recent days, and investors lack certainty before the Federal Reserve announces interest rate guidance next week. In this context, Friday’s producer price index (PPI) and the University of Michigan’s consumer sentiment index are expected to determine whether U.S. stocks can extend Thursday’s gains.
“Markets have to adjust to the fact that we’re moving from a stimulus-based economy, both fiscal and monetary, to a fundamentals-based economy, and that’s something we’re trying to navigate,” said Wiley Angell, chief market strategist at Ziegler Capital Management.
Most mega-cap technology and growth stocks rose. Apple, Nvidia, and Amazon rose between 1.2% and 6.5%.
Energy stocks slipped 0.5 percent, although Exxon rose 0.7 percent after the company announced it would expand its $30 billion share buyback program. The sector has been under pressure in recent sessions as commodity prices slumped. U.S. crude is currently hovering around levels seen in early 2022.
[With 200 individual entities included in the list, the EU will launch the ninth round of sanctions against Russia]
The official website of the European Commission issued a statement on the 8th, stating that the EU intends to adopt the ninth round of sanctions against Russia, including adding nearly 200 individuals and entities to the sanctions list. At the same time, it will impose sanctions on three Russian banks and cut off Russia’s access to drones and Channel for unmanned aerial vehicles. The Russian side responded that the European Union and other Western countries have exceeded the boundaries of rational behavior.
Overall, under the prospect of further interest rate hikes in the United States, weak fuel demand drags down oil prices, and concerns about economic recession continue to intensify. Keystone, an important oil pipeline in the United States and Canada, is expected to recover. Many negative factors will suppress oil prices. Maintain a bearish tone in oil prices. The news about the recovery progress of the Keystone oil pipeline may affect the oil price in the short term and drop to the 70 mark.
At 8:28 Beijing time, U.S. crude oil was trading at $71.98 a barrel.