FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
Libertex information and reviews
FxPro information and reviews

Recession fears squeeze oil as gas takes centre stage

18 August 2022

In times unmatched since the 1970s, Europe finds itself in the grip of the biggest energy crisis in recent memory. Since early last year, global oil prices have doubled, coal prices have nearly quadrupled, and European natural gas prices have increased almost seven-fold. This is inevitably prompting both businesses and consumers to tighten their belts, the effects of which are being felt in both Manufacturing and Services PMIs across the old continent.

Now, however, a combination of increased supply and lower industrial demand could actually end up pushing prices lower. But isn't that good news? In the short term, perhaps yes, but macroeconomically speaking…not so much. Wherever there's a crisis, though, traders and investors are sure to find an opportunity if they look hard enough. In this article, we'll examine the future trajectory of the energy market and try to identify the best way to play the current situation.

OPEC to the rescue?

For many, the increases in oil prices that have hit the average consumer hardest are viewed as artificially sustained. After all, there is more than enough easily accessible oil in the world. It simply isn't being released onto the market. While simple in its analysis, it is essentially true. OPEC had been under pressure to increase supply for several weeks following Biden's visit to the Kingdom of Saudi Arabia last month. However, not all of the cartel's members are quite as friendly to the Americans as Riyadh. Many of the group's member states are more than happy with higher prices and would prefer the commodity remain scarce. After much deliberation, OPEC finally agreed to a modest 100,000 bpd, which, while far from a panacea, will certainly go some way towards controlling prices into the autumn. Indeed, both Brent and US West Texas Intermediate immediately responded to the news by falling 0.2% to $97.22 and $91.71, respectively.

With continued vocal pressure to ramp up production from the world's biggest superpower, we could thus reasonably expect a downtrend to ensue in the coming months.

Subdued demand worrying economists

While rising output has certainly helped to control prices, the cause of falling oil prices is by no means all supply side. Recent data show that US gasoline demand is currently lower than it was two years ago at the height of the pandemic lockdowns, with $120+ per barrel of oil keeping more drivers off the road than COVID-19. Meanwhile, electricity prices, which are directly correlated with gas and coal prices, have been rising exponentially.

Political instability in the East and the lack of viable alternatives have meant that European gas and electricity prices have run riot. Unlike oil, today's consumers are not able to 'opt out' of electricity use and, with the heating season fast approaching, they will similarly be forced to heat their homes regardless of the cost.

Despite natural gas's lower susceptibility to demand-side pressure, many businesses are cutting back on power use on account of high prices, and this is leading to accelerated inflation and negative growth in many EU nations. If this trend continues into the autumn and winter, Europe could well be headed for a full-blown recession. In that case, one would expect a protracted downtrend to ensue.

Trade oil and gas CFDs with Libertex

With all of the political and economic instability in the world, nobody truly knows where the energy markets are headed in the short-to-medium term. But with Libertex, at least you'll have the possibility to trade energy CFDs long or short for maximum flexibility and diversification. Libertex offers a range of commodities CFDs from Brent, WTI and Light Sweet crude oil all the way to Henry Hub natural gas – not to mention a wide variety of related stock CFDs, including Exxon Mobil, Total and Gazprom. The choice is yours! Enjoy tight spreads and low commission while trading conveniently in our multi-award-winning app. For more information or to create your own account, visit www.libertex.com




The Pound is having tough times
The Pound is having tough times

The Pound Sterling is keeping balance against the USD as much as possible. The current quote for the instrument is 1.0800. The news released yesterday were rather puzzling. The Bank of England announced...

29 Sep 2022

EUR/USD: bears now target 0.9500
EUR/USD: bears now target 0.9500

EUR/USD drops for the seventh straight session and tests 0.9535. Below the 2022 low at 0.9535 comes the 0.9500 region. EUR/USD extends the leg lower to the proximity of 0.9530 earlier on Wednesday...

28 Sep 2022

Gold Shows Signs of Life, But Heads Towards Another Losing Month
Gold Shows Signs of Life, But Heads Towards Another Losing Month

The precious metal is largely considered as a hedge to inflation, but it has not confirmed this status during the current year. It did kick it off with a rally, but as the Fed begun hiking rates back in March...

27 Sep 2022

Penny Stocks: What Are They?
Penny Stocks: What Are They?

Locating penny stocks with buy ratings is getting more and more challenging. The markets become less adventurous as interest rates rise. That indicates that penny stocks, which are riskier by definition...

20 Sep 2022

Bitcoin and Ethereum: Inflation Brought Down The Prices
Bitcoin and Ethereum: Inflation Brought Down The Prices

Strong inflation brought down the price of bitcoin yesterday from $22,800 to the $20,000 support level. This morning, the price of Ethereum formed a new seven-day low at the $1550 level...

15 Sep 2022

Cooler USD & Stocks Higher Ahead of CPI
Cooler USD & Stocks Higher Ahead of CPI

USDIndex – Slips (108.00 tested) for a 5th straight day, lifting EUR & GBP. Fed Funds Futures back to 90% chance of 75 bp (third consecutive) hike...

14 Sep 2022

Editors' Picks

HFM information and reviews
IronFX information and reviews
FXCM information and reviews
NordFX information and reviews
Vantage information and reviews
FP Markets information and reviews
FP Markets

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.