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Oil trading: Asian punters book crude profits amid uncertainty

15:37, 12 August 2022

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An oil and gas exploration rig in the Gulf of Thailand.
Uncertainties are destabilising the oil markets - Photo: Getty Images

Crude oil futures witnessed some profit-taking selling pressure in early Asian trade on 12 August, following two straight days of gains in oil trading.

US crude shed 0.31% to $94.05 a barrel earlier in the day. Meanwhile global benchmark Brent oil declined 0.3% to $99.30 per barrel.

WTI crude price chart

“While sentiment in the broader financial markets remained upbeat on 11 August from the lower-than-expected US July inflation data reported the previous day, crude got an additional lift from news of a major unanticipated outage in the US Gulf of Mexico,” according to Singapore-based oil market analyst Vanda Insights in a 12 August note to investors.

Brent oil price chart

“At most, any fresh data or developments on supply and demand only end up in a supporting role to whatever happens to be the dominant sentiment of the day across risk assets,” added Vanda Insights.

“The eye-catching divergence in global oil demand outlook between the International Energy Agency (IEA) and (producers’ cartel) OPEC in their monthly reports released on Thursday underscores the increased uncertainty destabilising the market.”

Conflicting consumption forecasts

Soaring oil use for electricity generation and natural gas-to-oil switching are boosting crude demand. This prompted the IEA to raise its estimates for world demand growth by 380,000 barrels a day to 2.1 million barrels per day. “World oil demand is now forecast at 99.7 mb/d for the year,” said its Oil Market Report.

Meanwhile, OPEC has cut global oil demand growth for 2022 a third time since April. Slowing economic growth the world-over will hurt demand, the cartel warned in its Monthly Oil Market Report.

The 13-member group lowered its 2022 demand forecast by 260,000 barrels a day, from July’s estimates, to 100.03 million barrels per day.

Silver

21.07 Price
+1.690% 1D Chg, %
Long position overnight fee -0.0115%
Short position overnight fee 0.0026%
Overnight fee time 21:00 (UTC)
Spread 0.020

Natural Gas

6.94 Price
+4.790% 1D Chg, %
Long position overnight fee -0.1782%
Short position overnight fee 0.1325%
Overnight fee time 21:00 (UTC)
Spread 0.006

Oil - Crude

85.82 Price
+3.610% 1D Chg, %
Long position overnight fee 0.0235%
Short position overnight fee -0.0429%
Overnight fee time 21:00 (UTC)
Spread 0.03

Gold

1,725.62 Price
+1.540% 1D Chg, %
Long position overnight fee -0.0156%
Short position overnight fee 0.0055%
Overnight fee time 21:00 (UTC)
Spread 0.18

“World economic growth is revised down to stand at 3.1% for 2022 and 2023. This is a result of weaker 2Q22 growth in the major economies and an observed soft trend in some key economies.”

Speculators are now more bearish

“Speculators have sold oil along with slowing global growth, falling PMIs and an economically destructive power/gas situation in Europe,” Bjarne Schieldrop, the chief commodities analyst at the SEB Group wrote in commentary published on 8 August.

“Except for possibly more oil from Venezuela and Iran it looks like OPEC+ now has come to the end of the line with little extra supply to offer. Following its latest meeting it implicitly stated that if the world wants more oil it basically needs to produce it itself.”

Global oil supply hit a post-pandemic high of 100.5 mb/d in July as maintenance wound down in the North Sea, Canada and Kazakhstan, according to the IEA.

OPEC+ ramped up total oil production by 530,000 barrels a day in line with higher targets, while non-OPEC+ output rose by 870,000 barrels per day.

 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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