Crude oil flows to $30 per barrel so fast! On Thursday morning WTI touched the level $32.20, while Brent fell as low as $34.26 on Wednesday. Traders are waiting for the next move, listening to the news from the Middle and Far East. At the moment the East is forcing the West to rethink trends of the markets and improve our world, if possible.
In the Middle East the conflict between Saudi Arabia and Iran promises a price war to keep a market share. The global industry fails to work out the oil produced in 2015, however no one considers stop pumping. Looks like Tehran plays a game of its own, ready to drown the market with 500000 barrels of cheap oil at the very moment of release from sanctions. Tehran already blamed Riyadh for collapsing Iranian economy by crude oil glut. Some of OPEC members will be keen to add blames of their own. Nevertheless, Iranians are the masters of their fate. They manage to outspeak the International Atomic Energy Agency, not to mention the world authorities, and to domesticate Russian bear. They have the power to trouble the oil market.
Glancing at the Far East, we do not find any relief. North Korea celebrates the successful test of the hydrogen bomb proclaiming the end of the American hegemony in the region. The world is terrified trying to calculate the probability of the disaster. Besides the mad dictator, Far East is dangerous for the global economy due to the falling asleep manufacturing in China. The People’s Bank of China has been seeking the appropriate policy to revitalize the Yuan and to support the Shanghai Composite Index and as a result of the attempt the bank puzzled the market and shattered the index. Beijing has been spending more and more dollars: $87 billions in November, $107.9 billions in December, but failed to restore the economy growth. The world is terrified to be infected by the recession.
Wall Street is following Chinese selloff. The last week, gasoline supplies in U.S.A. gained 10.6 million barrels, adding the pressure to shares of the energy companies. However, the most damaged sector of the S&P 500 is the financial one. Famous George Soros emphasized similarities between the financial crash of 2008 and the very beginning of 2016. Moreover, Europe overreacted, sending the DAX below 10,000. Even our Tel Aviv stock exchange is involved in the total drawdown.
Thus the 2016 begins as the year of the East blow, cruel and irrational.