The year 2016 was full of major events and the leading investors suffered from an extreme level of confusion in the global market. The first issue was the pending rate hike decision by the FED as they were supposed to hike their interest rate in the very early of this year. However due to the ongoing poor performance of the U.S economy they were struggling hard as they couldn’t manage to hike their interest rate on stated time. In the last FOMC meeting minutes, the FED hike their interest rate on the basis of 25 points and this gave the U.S dollar major boost in the global economy. But before that, the energy sector was stabilized by the OPEC decision as they commenced a cap in the production of oil in the global economy. The price of oil was sharply falling on the ground creating new lows in the market and investors were in fear to see such a dramatic in the price of oil.
The world supply of oil was always exceeding its demand and for this reason, the price kept on falling on the ground. But after the OPEC decision the price oil found some solid support and started to rally higher in the market. Most of the leading oil producing countries in the world appreciated the OPEC decision since it helped the oil market to stabilize. On the contrary, the Chinese government also imposed 275 working day policy on its coal miners and it caused the price of coking coal to rally higher in the market. Coking is one key ingredient for making thermal electricity in the global world and the sharp rise in the price of coking coal Chinese government is thinking that they will enhance their economic performance in the near term future.
In the last Friday, the price of crude show a nice bullish momentum in the market and ultimately settled at $53.05 in the market. However, the price of Brent crude oil was slightly down in the market for near about 8 cents during 1 PM Central and settled at $55.15 on the eve of market closing. Traders are expecting low volatility in the market as most of the investors are currently on the sideline enjoying Christmas holiday.to be precise the major movement of the year 2016 is at its end since no major fundamental news release is there to drive the price in the market. On the last OPEC meeting, there has been a cap on the production of oil and such a drastic event from the OPEC member has not been since 2008.But it’s extremely necessary to bring the stability in the price in the energy sectors.
Most of the traders are now worrying about this real implementation of the plan as the number oil rigs went from 12 to 512 in the U.S which clearly shows that they are extracting more oils increasing the supply of oil in the global market. But for better stability in the oil price the supply needs to be extremely tight since the current demand for the oil is was less than the ongoing supply. Moreover, Iraq has decided not follow OPEC rule and they are going to increase their oil production in the near term future. Such an action from the leading oil producing countries in the global economy pushed the investor’s sentiment into a bearish mode. If the Kurdistan regional Government often known as KRG stick to their proposed plan and continue to increase their production then the price of oil will be under extreme bearish pressure in the market. According to the industry scores, it KRG action clearly exhibits that they are not adhering to limit the production of oil in the near future.
If Iraq plans to increase their production that the no leading countries can take action due to recent pullout of most of the troops from Iraq. The leading leaders of Iraq have clearly stated that they will keep their production rate higher despite the OPEC decision since it’s extremely needed to ensure their economic stability in the global market. However, to bring the stability in the energy sector OPEC decided to limit the production by 2.1 million barrels per day whereas the KRG is producing more than 6 million barrels per day. If things continue like this than the temporary ground in the oil price will collapse from the very beginning of the next year. Moreover, the green bucks might gain significant strength in the next year since FED will be looking for at least three hikes.
The current sentiment on the Green bucks is extremely positive as Donald trump stated they are going to increase the fiscal spending sin the next year. But three rate hike in a single year will be extremely difficult for the FED since they need to monitor their economic sectors very precisely so that they don’t impose an immature hike in the U.S government. According to the leading economist, an immature hike might weaken the dollar in the near the term future. To be precise the energy sectors is gradually stabilizing due to the indecision between the leading oil producing countries in the world. Professional oil investors are thinking that the price oil might exhibit a strong surge in the market if most of the leading oil producing countries limit their production oil causing high demand in the market. To be precise, the next year going to be extremely important for the oil investors since large movement will be seen in the market.