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Market News Crude oil trading reminder: oil prices tumbled nearly 4%, U.S. stocks plummeted to help bears

Crude oil trading reminder: oil prices tumbled nearly 4%, U.S. stocks plummeted to help bears

During the Asian session on May 19, U.S. oil continued its decline and is now at $108.58 per barrel. Although U.S. crude oil inventories fell, government data showed that U.S. refiners increased oil refining, which weakened traders’ concerns about tight supply, and the large U.S. stocks. The drop dragged oil prices lower.

2022-05-19
10735
In Asian hours on Thursday (May 19), U.S. oil continued its decline and is now at $108.58 per barrel; U.S. oil fell nearly 4% on Wednesday. Although U.S. crude oil inventories fell, government data showed that U.S. refiners increased oil refining, allowing Traders' worries about tight supplies waned, and a slump in U.S. stocks dragged oil prices lower.



During the day, the focus will be on the number of initial jobless claims in the United States for the week ended May 14, and the annualized total sales of existing homes in the United States in April; at 4:00 on Friday, the Fed's Kashkari spoke on inflation.

Negative factors affecting oil prices


[Japan releases crude oil reserves]

Japan's Ministry of Economy, Trade and Industry said on Wednesday that it will sell 750,000 kiloliters or 4.72 million barrels of oil from the National Reserve on June 10. This is part of the release of crude oil from reserves led by the International Energy Agency (IEA). The winning bidder will receive the crude oil on or after July 20, the Ministry of Economy, Trade and Industry said in a statement.

[The S&P 500 and the Dow have their biggest losses in nearly two years]

U.S. stocks tumbled on Wednesday, with Target plunging about 25% as the retailer became the latest victim of a surge in prices, underscoring deep concerns about the U.S. economy. Both the S&P 500 and the Dow Jones Industrial Average had their biggest one-day losses since June 2020.

Target, which reported a halving in first-quarter profit, warned that margins would be more affected given higher fuel and freight costs. Shares of the company tumbled about 25 percent, wiping about $25 billion off its market value, in its worst one-day performance since the October 19, 1987 Black Monday crash.

Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said, "We believe that inflation has been outpacing wage gains for even longer than people expected, which is having a constant impact on retail spending, which is a major factor in today's market sell-off. Retailers are starting to expose the impact of the reduced purchasing power of consumers.”

Rate-sensitive giant growth stocks exacerbated recent losses and dragged the S&P 500 and Nasdaq lower. Amazon, Nvidia (Nvidia/Nvidia) and Tesla tumbled nearly 7%, while Apple tumbled 5.6%.

Liz Young, head of investment strategy at SoFi, said, “At this particular time, the tailwinds outweigh the tailwinds for growth stocks and the market is trying to decide how bad things can get. The market is nervous about the next six months. We may You will find that there is no need to be as nervous as it is now, the market does tend to overreact to the downside.”

All 11 sectors of the S&P 500 were wiped out, led by consumer discretionary and consumer staples stocks, both down more than 6%. Rising inflation, the conflict in Ukraine, prolonged supply chain disruptions, coronavirus lockdowns and monetary tightening by major central banks have all weighed on financial markets recently, raising fears of a global economic slowdown.

The Wells Fargo Investment Institute said on Wednesday it downgraded its economic forecast and, under its current base-case forecast, expects a mild U.S. recession in late 2022 and early 2023.

Wall Street's latest sell-off has pushed the S&P 500 to around 17 times forward earnings, the lowest multiple since the coronavirus-fueled sell-off in 2020, according to Refinitiv data. The CBOE Volatility Index rose to 31 after six straight sessions of losses.

[S&P cuts U.S. economic growth forecast]

Paul Gruenwald, chief global economist at S&P Global, said: "We now expect U.S. economic growth to fall by 80 basis points to 2.4%. The reasons for the lower forecast include higher energy and commodity prices, longer-than-expected conflict between Russia and Ukraine, and normalization of monetary policy. accelerate. The risk profile compared to the baseline forecast has deteriorated since the last forecast, with a clear downside risk.

UBS analyst Giovanni Staunovo said risk sentiment shifted as stocks fell, with both benchmark contracts paring earlier gains of $2-3 a barrel.

Dennis Kissler, senior vice president of financial trading in Korea, said that the market is extremely volatile, so any inconspicuous news or a stock market sell-off could lead to large swings in the crude oil market, and the fundamentals remain bullish.

In addition, JPMorgan lowered its forecast for real GDP growth in the second half of 2023 from 3% to 2.4%, from 2.1% to 1.5% in the first half of 2023, and from 1.4% in the second half of 2023. down to 1%.

Mohamed El-Erian, chairman of fund management firm Gramercy Fund Management, said that while the U.S. may be able to avoid a recession, stagflation is inevitable. We've seen growth decline and we're going to see inflation stay high. The Fed is now finally starting to catch up with reality. They still have to digest a "significant slowdown in growth," which means the market will continue to adjust.


[8 suspected cases of monkeypox found in Madrid, Spain]

On May 18, local time, health authorities in the Madrid region of Spain reported the discovery of 8 cases of suspected monkeypox virus infection. On the same day, the Spanish Ministry of Health issued an emergency health alert to the health departments of all regions in Spain, and asked them to find and provide samples of cases that meet the symptoms of monkeypox. A total of 10 cases of monkeypox have been confirmed in the UK and Portugal. Portugal confirmed 3 monkeypox cases through nucleic acid testing on the 17th, with 2 more to be confirmed and 15 still under study.

[22 countries report 429 cases of unknown hepatitis in children]

On May 17, local time, the World Health Organization said that there have been more than 400 cases of hepatitis of unknown cause in children worldwide, and researchers are investigating the cause.

According to an article published by Becker's Hospital Review on May 18, Philippa Easterbrook, senior scientist of the WHO Global Hepatitis Program, said that as of May 15, 22 countries around the world have appeared in 22 countries around the world. There were 429 related cases, up from 348 the previous week. In addition, researchers are investigating an additional 40 cases, and 75% of the children diagnosed are under the age of 5.

Bullish factors affecting oil prices


【U.S. crude oil inventories fell】

U.S. crude inventories fell last week as refining activity increased ahead of the busy summer driving season, even as the U.S. continued to release its strategic crude oil reserves. U.S. crude inventories fell by 3.4 million barrels in the week to May 13 to 420.8 million barrels, the EIA said, compared with analysts' expectations for a rise of 1.4 million barrels in a Reuters poll. Crude inventories continued to fall despite the U.S. Strategic Petroleum Reserve (SPR) falling by 5 million barrels to 538 million barrels, the lowest level since November 1987.

Refining activity picked up in the latest week as tight inventories of refined products and near-record exports forced U.S. diesel and gasoline prices to record highs.

"While the SPR unleashed 5 million barrels of crude, with higher production and higher imports, stronger refining activity and crude exports both contributed to a drawdown in inventories," said Matt Smith, chief U.S. oil analyst at Kpler.

Refinery throughput rose by 239,000 barrels a day last week, boosting overall refinery utilization by 1.8 percentage points to 91.8 percent. Both the East Coast and Gulf of Mexico are operating at more than 95% capacity, bringing these facilities close to their highest possible operating rates. U.S. refiners have struggled to build up refined oil inventories as sanctions on Russia have reduced global inventories and sent global buyers scrambling to buy diesel, gasoline and other products. U.S. gasoline inventories fell 4.8 million barrels to 220.2 million barrels, the seventh straight weekly decline.

Distillate stockpiles, which include diesel and heating oil, rose by 1.2 million barrels last week, the EIA said. Net U.S. crude imports fell by 342,000 barrels per day last week, while crude production edged up 100,000 barrels per day to 11.9 million barrels a day. Crude inventories at Cushing, Oklahoma, fell by 2.4 million barrels last week.

[Ukraine has absolutely no willingness to conduct Russia-Ukraine negotiations]

On the 18th local time, Russian Presidential Press Secretary Peskov said that the negotiations between Russia and Ukraine have not advanced, and Ukraine has absolutely no willingness to negotiate. In addition, Ukraine also tried to describe the Ukrainian soldiers who surrendered from the Azov Steel Plant as evacuating. It needs to be clear that they laid down their weapons and surrendered instead of evacuating.

Peskov also said that if European countries imposed taxes on oil imports from Russia, it would only increase consumer spending and have to find other alternative sources.

On the 17th local time, Podoljak, an adviser to the Office of the President of Ukraine and a member of the Russian-Ukrainian negotiating delegation, said that negotiations with Russia are on hold, and the two sides have not made any progress after the Istanbul communiqué.

[Russia expels European diplomats]

On the 18th local time, the Russian Foreign Ministry announced the expulsion of 34 French diplomats in Russia. In response, Russia announced the expulsion of 27 Spanish diplomats in Russia and 24 Italian diplomats in Russia, the Russian Foreign Ministry said in a statement.

[For the first time in history, oil prices in all states have risen above $4 a gallon at the same time]

According to US media reports on May 18, local time, the average price of gasoline in all states in the United States rose to $4 per gallon and above on the 17th, the first time in history. As of the morning of the 18th, the average gasoline price in only 11 states in the United States was hovering at a relatively low level of $4.026 to $4.185 per gallon. The "Capitol Hill" said that as the May holiday and the summer vacation approach, gasoline demand will continue to climb, resulting in higher oil prices.



Overall, U.S. refiners have increased their refining capacity, which has reduced traders’ concerns about tight supply to help bears; the sharp drop in U.S. stocks has further dragged down oil prices; , or trigger an escalation of geopolitical tensions, limiting the decline in oil prices.

At 7:20 GMT+8, U.S. crude oil is now at $108.58 a barrel.
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