The first half of the week seemed to belong to oil buyers, but the second half of the week saw a correction of the earlier gains. The final oil price is on Friday roughly where it was on Monday.
Oil prices fell on Friday for the second day in a row, with a barrel of WTI crude costing around $59. The correction comes after crude production resumed in Texas. Earlier, an attack of winter led to a standstill there. Current weather forecasts assume that soon it is expected to be even 20 degrees in Texas. At the same time, we learned that Washington is ready to talk with Tehran about returning to the 2015 agreement, which was aimed at preventing Iran from acquiring nuclear weapons. In addition, traders are starting to worry about an upcoming increase in oil supply from OPEC+ countries as the organization meets as early as March 4. Oil prices rose to 13-month highs this week thanks to a larger-than-estimated drop in U.S. crude inventories and signs of economic recovery. Since the beginning of the year, the price of WTI has risen more than 23 percent.
In addition to greater volatility in the oil market, this week also brought interesting developments in the currency market. We are talking about the British pound, which crossed the $1.40 level for the first time since April 2018. This occurred on hopes that the UK may ease economic restrictions earlier than expected due to the rapid implementation of Covid-19 vaccines. There are already signs that the British economy may be strengthening. The PMI index showed that UK private sector output stabilized in February, while inflation rose slightly more than expected in January. Still, retail sales fell 8.2 percent month-on-month in January 2021, the most since a record 18 percent drop in April. The pound also appears to have been supported by diminishing expectations of negative interest rates and a post-Brexit trade deal with the European Union. In 2021, the pound is performing the best among the world's major currencies.
Here it is worth considering that the British economy battered by uncertainty over brexit and a trade deal along with the negative effects of the Covid-19 outbreak is unlikely to have room to deteriorate. According to recent data, this was the worst year in three centuries. The UK could therefore probably only get better, which may favor the pound in the long term.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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