In this analysis, we explore the recent decline in oil prices and its implications on the trading oil price.

Trading Oil Price Plummets – What You Need to Know Now

VPTrade analyses the recent fall in oil prices and how it affected the daily oil trading price and commodity markets.

The drop in US interest due to inflation and an increase in stockpiles could affect the demand of the world’s largest oil consumer.

Insights entail the oil price in the energy market, the influence of central bank policies, stock changes, also known as inventory changes, and the geopolitical situation on the oil price and demand.

Trading Oil Price Declines Amid Interest Rate Concerns

Oil prices on Wednesday fell a bit more than 1%, a third straight day of retreat, ahead of government inventory numbers that suggested demand for petroleum was climbing – a trend that might make the Federal Reserve think twice about interest rate cuts that could crimp demand in the world’s biggest oil user.

Trading oil also slipped as U.S. crude oil and gasoline inventories rose last week, sources told Reuters on Tuesday, citing American Petroleum Institute data.

Analysts had expected the inventories to have fallen.

Brent crude futures lost 87 cents, or 1.1%, to $82.01 a barrel by 1255 GMT, and U.S. West Texas Intermediate (WTI) crude was 81 cents, or 1%, lower at $77.85. Both benchmarks slipped about 1% on Tuesday.

Physical Markets and Trading Oil Price Trends

Physical crude markets remain under pressure Another signal that fears of tight prompt supply are beginning to ease is that Brent’s first-month contract over the second – a measure called backwardation, named because the forward curve slopes upwards – is near a January low.

Fed policymakers said on Tuesday that the US central bank should hold off on a rate cut until a few more months have passed to make sure inflation is back on track to its 2% target.

Higher borrowing costs slow economic growth and can weigh on oil demand.

Top Trending Stocks You Need to Watch Now: These Picks Could Skyrocket Your Portfolio!

Federal Reserve Minutes and Trading Oil Price

Investors were also awaiting minutes on Wednesday from the US Federal Reserve’s last policy meeting and the latest official U S oil inventory data from the Energy Information Administration (EIA), due later in the day.

‘The FOMC [Federal Open Market Committee] minutes will be analysed for the Fed’s assessment of the bumpy Q1 inflation and signals on its policy outlook for the possibility and duration of the interest rate cut in 2024,’ said a report from ANZ analysts.

US Gasoline Reserves and Trading Oil Price

The US-administered reserve of refined fuel in northeastern states will almost certainly remain closed after President Joe Biden’s administration announced plans on Tuesday to sell nearly 1 million barrels of gasoline from the stockpile.

The actions represent the final drawdown of the nearly decade-old emergency fuel reserve established in 2014 amid motorists’ panic buying in the wake of Superstorm Sandy.

Storing refined petroleum such as gasoline, is more expensive than storing crude oil, so when the US Congress approved its latest funding bill in March, it included language to shut down the reserve.

Impact on Trading Oil Price and Market Dynamics

Bids are due on 28 May, and proceeds from the sale will flow into the Treasury Department’s general funds, the department said.

Volumes will be sold in lots of 100,000 barrels, each barrel containing 42 gallons, and gasoline is expected to flow through local retailers ahead of the Fourth of July holiday.

While the sale was mandated by bipartisan legislation, both the Biden administration and the Republican presidential hopeful Donald Trump attempted to score points off it.

Energy Secretary Jennifer Granholm said that the Department of Energy had timed the sale to be released ahead of the run-up to peak summer driving demand.

‘By doing this strategic release between Memorial Day and July 4th, we can ensure that a suitable supply flows to supply the northeast at the time when hard-working Americans need it most,’ Granholm said in a release.

Gasoline Prices and Trading Oil Price Trends

U.S. gasoline prices have fallen for four straight weeks to $3.58 a gallon amid ample supplies but remain about a nickel more than a year ago, according to the Energy Information Administration.

Trump alleged that Biden was doing so for political purposes, to drive down retail gasoline prices. ‘And so he’s trying to stop that because high gasoline prices are not good for elections.

Trading Oil Price and U.S. Market Dynamics

And US gasoline prices are now about 30% less than in June 2022 when they peaked over $5.00 a gallon.

Following record US crude oil output under Biden, prices are falling as supply outpaces demand. Trump implied that Biden was doing that because he was unable to let ‘drill, baby, drill’.

The petroleum reserve will be selling into a well-supplied US market. On Monday, pump prices fell for the fourth straight week, despite the start of the summer driving season on the upcoming Memorial Day weekend.

Refinery Output and Trading Oil Price

The higher level of refinery output and soft fuel demand this year have helped alleviate the constraints that US consumers have faced since the pandemic.

As of 26 April, gasoline supplies on the East Coast of the US stood at 55.5 million barrels, 6% higher than the same time a year earlier but 8% below its historical average for this season.

The plants buying the gasoline will have the fuel piped off or delivered on or before 30 June Some 900,000 barrels will be sold off from Port Reading, New Jersey, and nearly 99,000 barrels from South Portland, Maine.

Trading commodities: Start trading oil & gold today!

Geopolitical Factors and Trading Oil Price

Once the reserve has been established, the energy secretary can’t create any new regional petroleum product reserve until it has been funded before the president submits an annual budget to Congress.

Bob McNally, president of the consultancy Rapidan Energy, told the Washington Post that because the reserve holds far less gas than standard stockpiles, it is ‘too tiny to provide much energy security and won’t be missed.

It’s a lot like the SPR [Strategic Petroleum Reserve], but instead of 700 million barrels of crude oil (which could run the US economy for up to three months) you have the equivalent of your petrol tank.’

Global Market Impacts on Trading Oil Price

Abu Dhabi National Oil Company will sell about a 5.5% stake in its drilling unit more than two years after raising $1.1 billion through an initial public offering of part of the business.

Additional shares in the unit will be sold to eligible institutional investors, the company said on Wednesday.

The shares of ADNOC Drilling closed at 4.13 dirhams ($1.12) on Wednesday, valuing the 5.5% stake on offer at $989.6 million.

The sale will start “immediately,” with the offer price and overall number of shares to be sold to be decided after the May 23 cut-off date, or earlier, the Abu Dhabi state producer said in a statement.

Market Inclusion and Trading Oil Price

By increasing its free float, ADNOC Drilling is likely to be added in the Morgan Stanley Capital International (MSCI) Emerging Market Index, which would add more value to the stock. That might happen at the next quarterly index review, according to ADNOC.

The deal requires ADNOC Drilling to have sufficient liquidity, meet certain financial ratios, and pass other tests.

Only after all this happens will the index provider include the company in the index.

The October 2021 sale had left ADNOC with a majority stake of 84% in ADNOC Drilling, with Baker Hughes holding a further 5%.

The stock rose 30% on its debut in the market. It was listed at 2.3 dirhams a share.

Investment Strategies and Trading Oil Price

The new sale ‘reaffirms ADNOC’s continued commitment to deepen the Abu Dhabi equity capital market and sustainably create value for shareholders across its listed portfolio,’ the state oil giant said.

The Egyptian investment bank EFG Hermes, as well as First Abu Dhabi Bank, Goldman Sachs and JPMorgan Securities, are joint global coordinators and book runners of the offering.

Vivo Energy, owned by global commodities trader Vitol, will put an initial 10 billion rand ($550.79 million) of investment into its South African operations in the wake of the company’s merger with Engen, South Africa’s trade minister Ebrahim Patel announced on Wednesday.

The investment was one of ‘various public interest and competition undertakings’ his ministry sought from the two entertainment companies to avoid job losses and continue supply contracts with local refineries.

Trading Oil Price and South African Market

‘Over the course of the next five years, Vivo will invest [about] 10 billion rand in green energy, infrastructure, and the upgrading of operations,’ Patel said at the signing ceremony with the senior executives of the company.

A further 4 billion rand investment could be made at some point in the future, depending on feasibility, in green energy and marine infrastructure, among other projects.

The workers’ ownership part of the deal would be funded via a mechanism that involves vendor funding – so that the workers wouldn’t pay directly for the shares.

The deal also requires Engen to continue to purchase fuel that’s been refined at Glencore’s Astron refinery in Cape Town for a period of 15 years, and from Sasol’s refineries in the north of the country for up to 10 years.

Local Market Impact and Trading Oil Price

Astron Energy and Sasol had argued against the merger at the competition hearings, concerned that their locally refined products would be undercut by imports.

‘This gives them a substantial buffer for local refineries and an injection to sustain and grow oil refining locally,’ Patel said of a supply commitment of about 100 billion rand ($6 billion) over the next five years.

On Tuesday, Engen and Vivo Energy announced the deal to merge their businesses was formally completed after competition regulators in April agreed with Malaysia’s Petronas to sell its 74% stake in Engen to Vivo Energy.

The combined Vivo Energy group now has more than 3,900 service stations and more.

More than 2 billion litres of storage capacity in 28 African markets ‘Africa and South Africa will remain a very important part of Vitol’s investment plans,’ said Vitol’s country manager, Harvey Foster.

French Market Dynamics and Trading Oil Price

France backs ‘those who believe in France’, not the others, says Emmanuel Macron in Q&A with French magazine L’ExpressObama’s historic sanctions on Russian oil outfit Rosneft in 2014 acted as a wake-up call for Total, which has been seeking to raise its share of US-listed companies to 20% from around 15% as it faces shareholder pressure.

‘France backs ‘those who believe in France’, not the others,’ President Emmanuel Macron said in response to a question published on Wednesday in French magazine L’Express on whether oil major TotalEnergies would go ahead with a planned listing in the United States.

‘Mr Picqué sometimes rages against taxes, but he never protested about being French when he went to export markets,’ Macron said, referring to Total’s chairman Christophe de Margerie.

‘It’s in TotalEnergies’ interest to stay in France.’

Corporate Strategies and Trading Oil Price

The public scrutiny of its carbon footprint, not to mention its considerable windfall energy profits, have forced the company to tread a PR tightrope at home, where it offers pump rebates to drivers and is a major employer.

At an analyst call on 26 April, Pouyanne told analysts TotalEnergies was seriously looking at the possibility of the primary listing in New York to ensure ‘ex-ante easier access for those U.S. investors’.

‘We have more and more U.S. shareholders… and we have fewer European shareholders, including French shareholders – probably because of all the debate about ESG, etc.,’ Pouyanne said this month. ‘But we will keep a French listing for sure, whatever our decision [with] Wall Street.

From the above analysis I can identify that many interventions would affect the dynamic of trading oil price. Those factors are from geopolitical events to the central bank’s interventions.

For instance, when there is conflict in a country that has oil products, it affects the output by reducing production.

On the other hand the interest rate cut can encourage people to consume more and help all business field to move forward.

The trading oil price will increase because of the desire to buy more when the interest rate is down, and there can be an opportunity to pass profits down the chain.

There can be many surprises from central banks, market might focus on the inventory changes and the geopolitical reasons to determine whether the trading oil price will go down or up.

At the end of the day, it is oil price’s fate as a movements in interest rates, inventory changes, and geopolitics may drive the trading oil price and market participants’ attention to those areas.

As we stay in 2022 for the rest of the year, we will certainly track what central banks will do and how trading oil price performance will impact the market.

You don't have permission to register