Crude price rises as OPEC cuts continue
After the overnight drop, the sterling rose today ahead of a key vote on Brexit. Today’s vote will be about whether parliamentarians are ready to extend the March 29 deadline. This will be the third vote this week. On Tuesday, Theresa May’s Brexit proposal was rejected by a large margin and yesterday, the members voted against leaving the EU without a deal. If today’s vote fails to pass, it will lead to a difficult period because there is no alternative deal to Theresa May’s proposal. If an extension happens, it will extend the amount of uncertainty in the country. As a result, businesses will not know how to plan for the future. In a statement, the European Commission’s Donald Tusk said that he was prepared to have the UK wait for a long time as it figures out what it wants.
After falling sharply in the Asian session, the price of crude oil recovered after it emerged that OPEC had decreased supplies sharply in February. The decline was mostly caused by Saudi Arabia’s cuts and those of sanction-hit Venezuela. The total production decline by 221K barrels to 30.5 million barrels a day. Venezuela had the steepest declines, with the output falling by 142K barrels a day. Saudi has indicated that the cuts are necessary to ensure that prices of oil are balanced. At the same time, Iran produced more than 2.7 million barrels of oil per day, which was 800K lower than the same month a year ago. Yesterday, data from the EIA showed that inventories sunk by more than 3.8 million barrels in the previous week.
Today, investors fears about global growth continued. This was evidenced by the decline of China’s industrial production in February. The production rose by 5.3%, which was lower than the expected 5.5%. The fixed asset investments rose by 6.1%, which was in line with expectations. In Germany, the CPI rose by 1.5%, down from the previous 1.6%. On a MoM basis, the CPI rose by 0.4%. In the United States, the initial jobless claims rose by 229K, which was higher than the expected 225K. The continuing jobless claims rose by 1,776K, which was higher than the expected 1,775K. On a positive note, import and export prices rose by a higher margin while Chinese retail sales also rose by a higher rate than expected.
The EUR/USD pair moved slightly lower after the release of weak inflation numbers from Germany. The pair reached a low of 1.1295. On the hourly chart, this was still lower than yesterday’s high of 1.1337. This price was along the 50-day EMA but slightly lower than the 25-day EMA. The RSI moved slightly lower to a low of 45, while the MACD is also moving lower. The pair may move slightly lower again to the pivot level of 1.1270 and then resume the upward trend.
Yesterday, the price of crude oil rose sharply after the release of the US inventories numbers. The XBR/USD pair reached a high of 68. Today, the pair wiped those gains and reached a low of 67.30. It then recovered the losses and is currently trading at 67.9. On the hourly chart, the pair is approaching the upper band of the Bollinger Bands. The RSI has started moving up after declining to a low of 50. As a such, there is a likelihood that the pair will continue moving up as it attempts to reach the important resistance level of 70.
The volatility of the sterling was evident today ahead of a key parliamentary vote on Brexit. This was evidenced by the Average True Range (ATR) indicator which has continued to move up and down in the past few days. At the same time, the Envelopes indicator has started moving lower while the Market Facilitation Index remained slightly lower. Political uncertainty in the UK is making it difficult to predict the near-term direction of the pair.