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Oil Rallies as US Crude Stocks Decline in Tight Market

The United States is the largest consumer of crude oil in the world. Spurred by strong demand in the US and global supply shortage, oil prices have reached a new high. On 26th October, Brent crude was selling at $86 a barrel, and US oil was up by 0.7%…

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The United States is the largest consumer of crude oil in the world. Spurred by strong demand in the US and global supply shortage, oil prices have reached a new high. On 26th October, Brent crude was selling at $86 a barrel, and US oil was up by 0.7% to $83.96.

According to Goldman Sachs, Brent could likely go over $90 a barrel. Larry Fink, Founder, Chairman and Chief Executive of Blackrock – the world’s largest asset management company – said there was a high likelihood of oil reaching $100 a barrel. With oil prices soaring high, it could be an interesting time ahead for those who invest in oil prices as CFDs.

Crude oil prices in the US have risen

Crude oil prices in the US have risen due to short supply. OPEC (Organization of the Petroleum Exporting Countries) is maintaining a slow increase in crude oil supplies as demands in the US have ramped up. Refiners worldwide have also been increasing output due to high margins.

Oil prices rallied in the US when the US Energy Information Administration announced that crude and fuel inventories were tight. It also announced that, in three years, stocks of crude oil at the Cushing, Oklahoma storage facility had dipped to an all-time low.

Traders who invest in oil prices were faced with a period of opportunities and risks while oil was heading upwards. In the time that followed, oil prices had decreased as a decline in natural gas and coal prices had also put oil under pressure. However, some analysts predict that oil prices may rally further if OPEC sticks to its plan of gradually increasing output despite demands reaching pre-pandemic levels.

How to invest in oil prices

Those who wish to invest in oil could either make a direct investment in oil as a commodity or invest indirectly in various oil-related equities, such as the price movements of ETFs. These CFD investments are available through a broker or an online brokerage account and allow you to take advantage of price changes in both directions – increases as well as decreases – without having to purchase the underlying asset.

Crude oil provides energy and petroleum products to the global market. Investors can speculate on oil prices either by trading in oil derivatives or USO exchange-traded products that track the price of crude oil. You can also invest in oil prices indirectly by trading CFDs of oil service companies and oil drillers, or ETFs specialising in this sector.

Crude oil is also called black gold due to its high value. Compared to other commodities like base metals and precious metals, crude oil is also very volatile. The global economy relies heavily on crude oil and trading this commodity on exchanges has proven popular over the years. Crude oil can be considered the engine that drives economic growth in both developed and developing nations.

Here is how you can make more informed trading decisions when it comes to trading crude oil:

Understand how the supply and demand of oil works

To make the most of investing in crude oil, you should understand how demand and supply can affect crude oil prices. Production at various oil facilities globally and the demand for the commodity largely depends on the global economic output and the ability of the countries to buy it in large quantities. For instance, if there is an oversupply of crude oil, demand falls, which also causes a drop in oil prices. In contrast, stable production allows for higher price bids. As an investor, it is vital to keep track of such changes round the clock.

Develop a strong trading strategy

Just like you need a strong trading strategy when investing in the equity market or mutual funds, investing in oil prices as CFDs also calls for a strong trading strategy. If you are new to this form of trading, start by following experts who study the geopolitical scenarios and predict their impact on crude oil and trade prices. A solid trading strategy driven by hard facts rather than emotion is, therefore, necessary for optimising your CFD oil investment decisions.

Understand the difference between different types of crude

 Do you know the difference between Brent and West Texas Intermediate (WTI) crude trades? Brent is an offshore-produced oil, while WTI is produced in the US through oil drilling and fracking. Trade prices have begun to fluctuate thanks to higher WTI production and output compared to offshore Brent. It is therefore advisable to understand the performance of both before you make an investment.

 Pick your venue

According to Investopedia, per month, the NYMEX WTI Light Sweet Crude Oil futures contract conducts over 10 million contracts and offers high liquidity. It is also high-risk , owing to its 1,000-barrel contract and .01-barrel minimum price fluctuation.

The US Oil Fund is also a popular choice for those who want to invest in oil prices. The daily volume exceeds 20 million shares. Oil companies, as well as sector funds, offer diverse industry exposure, with various exploration, production and oil service operations having different opportunities.

Trading in energy markets and crude oil takes time and skill. For CFD trading in crude oil, you need to learn what moves the commodity, geopolitical scenarios, price history, and physical variations between different grades.

The post Oil Rallies as US Crude Stocks Decline in Tight Market appeared first on LeapRate.

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Economics

FT-IGM US Macroeconomists Survey for December

The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results. For GDP, assuming Q4 is as predicted in the November Survey of Professional…

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The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results.

For GDP, assuming Q4 is as predicted in the November Survey of Professional Forecasters, we have the following picture.

Figure 1: GDP (black), potential GDP (gray), November Survey of Professional Forecasters (red), November SPF subtracting 1.5ppts in Q1, 05ppts in Q2 (blue), FT-IGM December survey (sky blue squares), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

In the figure above, I’ve used the SPF forecast of 4.6% SAAR in 2021Q4; the Atlanta Fed’s nowcast as of yesterday (12/7) was 8.6% SAAR. A new nowcast comes out tomorrow.

Interestingly, q4/q4 median forecasted growth equals that implied by the Survey of Professional Forecasters November survey (which was taken nearly a month before news of the omicron variant came out).

The q4/q4 forecast distribution for 2022 is skewed, with the 90th percentile at 5% growth, the 10th percentile at 2.5%, and median at 3.5%. I show the corresponding implied levels of GDP (once again assuming 2021Q4 growth equals the SPF ).

Figure 2: GDP (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue squares), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

On unemployment, the median forecast is for a deceleration in recovery,

Figure 3: Unemployment rate (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue square), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle). NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

The survey respondents also think that the participation rate will take a long time to return to pre-pandemic levels.

Source: FT-IGM, December 2021 survey.

On inflation, the median is higher than the November SPF mean estimate for 2022 of 2.3% (and Goldman Sachs’ current estimate).

Source: FT-IGM, December 2021 survey.

The entire survey results are here.

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Over 170 companies delisted from major U.S. stock exchanges in 12 months

  Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies….

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Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies.

According to data acquired by Finbold, a total of 179 companies have been delisted from the major United States exchanges between 2020 and 2021. In 2021, the number of companies on Nasdaq and the New York Stock Exchange (NYSE) stands at 6,000, dropping 2.89% from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

NYSE recorded the highest delisting with companies on the platform, dropping 15.28% year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86% from 3,306 to 3,566. Data on the number of listed companies on NASDAQ and NYSE is provided by The World Federation of Exchanges.

The delisting of the companies is potentially guided by basic factors such as violating listing regulations and failing to meet minimum financial standards like the inability to maintain a minimum share price, financial ratios, and sales levels. Additionally, some companies might opt for voluntary delisting motivated by the desire to trade on other exchanges.

Furthermore, the delisting on U.S. major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by U.S. equity markets. As per a previous report, the U.S. controls 56% of the global stock market value.

A significant portion of the delisted companies also stems from the regulatory perspective pitting U.S. agencies and their Chinese counterparts. For instance, China Mobile Ltd, China Unicom, and China Telecom Corp announced their delisting from NYSE, citing investment restrictions dating from 2020.

Worth noting is that the delisting of firms was initiated due to strict measures put in place by the Trump administration. The current administration has left the regulations in place while proposing additional regulations. For instance, a recent regulation update by the Securities Exchange Commission requiring US-listed Chinese companies to disclose their ownership structure has led to the exit of cab-hailing company Didi from the NYSE.

Impact of pandemic on the listing of companies

The delisting also comes in the wake of the Covid-19 pandemic that resulted in economic turmoil. With the shutdown of the economy, most companies entered into bankruptcies as the stock market crashed to historical lows.

Lower stock prices translate to less wealth for businesses, pension funds, and individual investors, and listed companies could not get the much-needed funding for their normal operations.

At the same time, the focus on more companies going public over the last year can be highlighted by firms on the Nasdaq exchange. Worth noting is that in 2020, there was tremendous growth in special purpose acquisition companies (SPACs), mainly driven by the impact of the coronavirus pandemic. With the uncertainty of raising money through the traditional means, SPACs found a perfect role to inject more funds into capital-starving companies to go public.

From the data, foreign companies listing in the United States have grown steadily, with the business aiming to leverage the benefits of operating in the country. Notably, listing on U.S. exchanges guarantees companies liquidity and high potential to raise capital. Furthermore, listing on either NYSE or Nasdaq comes with the needed credibility to attract more investors. The companies are generally viewed as a home for established, respected, and successful global companies.

In general, over the past year, factors like the pandemic have altered the face of stock exchanges to some point threatening the continued dominance of major U.S. exchanges. Tensions between the US and China are contributing to the crisis which will eventually impact the number of listed companies.

 

Courtesy of Finbold.

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Economics

Stock futures open flat as Omicron concerns ease

Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%…
The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%

Stock futures opened relatively flat on Wednesday evening, though sustaining gains posted by a three-day recovery rally that was led by cooled investor concerns around the Omicron variant of the coronavirus.

Dow futures edged up 0.02%, while contracts on the tech-focused Nasdaq Composite inched up 0.10%. All major indexes closed up, with the S&P 500 adding 14.46 points to end the session at 4,701.21, just 0.5% short of the trading session on Nov. 24, a day before the latest COVID-19 variant was announced by the World Health Organization (WHO).

The moves were supported by eased virus fears after Pfizer Inc. and BioNTech reported that early lab studies show a third dose of their coronavirus vaccine mitigates the Omicron variant.

The vaccine makers had indicated the initial two doses may not be enough to protect against infection from Omicron. Shares of Pfizer (PFE) traded 0.62% lower on Wednesday, closing at $51.40.

With virus concerns diminishing, investors are pivoting their attention back to economic data, awaiting Consumer Price Index (CPI) figures on Friday to assess the extent inflationary pressures will persist.

If the Omicron variant was to lead to a resurgence in goods spending at the expense of services or to further complicate supply disruptions, there could be a clear inflationary impact, too, HSBC economist James Pomeroy wrote earlier this week in a research note to clients.

He stated: The inflation news in the past few weeks has been decidedly mixed — with upside surprises in both the U.S. and eurozone being offset by the possibility of some of the supply chain issues starting to alleviate, while energy prices have fallen sharply in recent days.

The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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