Fed Chair Dovish on Interest Rate Increases
January 18, 2021
Just a reminder that the energy markets close at noon today and no forward contracts can be done after that time. Contracting ends at 12:00 noon today Monday 1-18-2021.
With the Martin Luther King Jr Holiday today, most traders are off, and the market should be pretty lightly traded.
Per a Reuters report China economy held up well in 2020 the year of the coronavirus pandemic. Gross domestic product grew 2.3% in 2020, official data showed on Monday, making China the only major economy in the world to avoid contraction last year. China is expected to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%, according to a Reuters poll.
Despite the above positive news about China’s economy, they have recently confined about 22 million people to their homes on lockdowns due to rising COVID-19 cases. This news is a concern about lower demand out of China.
US energy firms this past week added oil and natural gas rigs for an eight consecutive week. Baker Hughes reported that the oil and gas rigs count increased by 13 to 373 in the week ending January 15th, its highest level since May. The US oil rigs increased by 12 to 287 this week, while gas rigs increased by 1 to 85.
The Commitment of Traders report showed that managed money funds in the oil market increased their net long positions for the second consecutive week. The funds increased their net long positions by 21,841 contracts in the week ending January 12th to 349,965 contracts on a combined NYMEX and ICE futures and options basis.
The US Federal Reserve Chair Jerome Powell stayed with a dovish tone on Friday saying that they US central bank will not raise interest rates anything soon. This in turn is bearish for the US dollar index which in turn is bullish for oil prices in general. When the US dollar index falls, investors of foreign currencies tend to buy oil priced in the greenback since it appears cheaper to them.