This week, the price of crude oil experienced fluctuations leading up to Friday’s trading session. Such changes were prompted by reports of a possible agreement between the United States and Iran that could result in an increase in global supply of crude oil.
According to reports from the Israeli news agency Haaretz, Israeli defence officials have indicated that negotiations have advanced towards an agreement that would permit Iranian oil to be reintroduced into the global marketplace, conditional upon Tehran’s discontinuation of high-level uranium enrichment activities.
According to recent reports, there is a possibility that the agreement reached may result in an increase of one million barrels per day in the supply of oil. This development follows closely after the declaration made last weekend by Saudi Arabia that it will commence a reduction in output by an equivalent quantity from July 1st.
The convening of the OPEC+ assembly on the preceding Sunday instigated an increase in both pricing and volatility that initiated the week; however, crude subsequently regressed to its previous range.
Despite an initial decline in the overnight news, the price promptly rebounded due to the unexpected surge in US initial jobless claims, which caused the US Dollar to plummet. The week ending June 3rd witnessed a print of 261k, exceeding forecasts of 235k.
The Treasury yields experienced a decrease, particularly in the back end of the curve. The 10-year note, which serves as a benchmark, decreased by approximately 10 basis points and settled around 3.72% prior to the commencement of Friday’s session.
The yield spread between the 2-year and 10-year treasury bonds continues to exhibit significant inversion with a value of approximately -0.80%, which is close to the historical record. This is considered to be a portentous indication for the future of the global economy, as previous instances of such inversions have been linked with an impending deceleration in economic performance.
The possibility of this occurrence is yet to be determined, however, traders are highly preoccupied with the issue of oil demand, particularly due to China’s inability to revive its economy following the lift of pandemic restrictions.
In contrast to several Western nations that are currently grappling with elevated inflation, China’s Consumer Price Index (CPI) was recorded at 0.2% year-on-year until the conclusion of May. The Producer Price Index (PPI) for the same duration was -4.3%.
The lack of price pressures in the world’s second-largest economy might continue to undermine crude.