Another commodity trading year is upon us and New Year’s resolutions across the western hemisphere are cloaked with purpose and resoluteness. Many have vowed to exercise more, eat healthy and save money. Even though only about 8 percent of these New Year’s resolution ambitionists persevere with their said goals, it is nonetheless a feeling of excitement and optimism of what might be. Market participants in the energy sector are most likely seeking that same sensation of excitement for less volatility and more stable prices, more clarity in supply/demand across the globe, transparency with trade talks/tariffs, pellucidity with Iran sanctions and possibly a reverse course in actions to avoid a further global slowdown or even a recession. If, however, the first 2 trading days of 2019 for the WTI futures contract for February delivery price action is any indication of what lies ahead, we are in for more of the same rollercoaster ride of uncertainty, high volatility and event risk price movements. The first trading day of the year brought on an intraday range of $3.43 a barrel or a 7.18% intraday move. Today, as of 12:30pm EST, we have already seen a 4.51% move or a $2.14 a barrel intraday trading range.
If you read this blog or pay close attention to the oil and gas industry or financial markets you most likely see a lot of headlines about OPEC, geopolitics, Saudi Arabia, President Trump, China, etc. It is a lot to keep track of and with only 4 weeks, left to 2018 there is an abundance of topics to discuss. Today, I wanted to give a short list of some of the major events unfolding across the globe and hopefully give some insight as to what is going on in the world that is effecting the recent volatility in the markets.
The geopolitical climate in the Middle East continues to intensify as the Saudi government is preparing to admit that Washington Post columnist Jamal Khashoggi was killed in the Saudi consulate in Turkey two weeks ago. President Trump has threatened to impose severe punishment on Saudi Arabia if it is proved they are behind the murder while the Saudi government has said they will respond with greater action if the United States moves forward. The threat of Saudi Arabia using their oil reserves as a weapon has the world on the edge of their seat.
November WTI traded higher by $1.36/bbl overnight, but a Presidential tweet has reversed the course.