December 4, 2022

Great Indian Mutiny

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India bans baked wheat; And crude oil falls for fear of supply

The growing prospect of a recession in the world’s first two economies could weigh on oil again this week, extending its volatility as powerful nations try to grab the key $ 1,800 level despite its impact.

An unexpected event this week marks the 14th anniversary of the discovery that India has banned the export of cereals due to a shortage of domestic supply.

Crude markets in Asia started on a rebound in just a few hours as bad data from China weighed on sentiment for bad data such as retail, industrial production and unemployment.

Daily oil

Last week crude oil prices fell 10% at the beginning of the week due to fears of a recession in the US, which did not change a bit before the end of the week.

Given the situation in China, the world’s largest oil importer, achieving another recovery like this week could be even more difficult.

“Current locks have been a serious problem for many economies in 2020 and 2021,” said Iman Sheridan, an economist at ForexLive.

“It is a shame that China is not able to cope with the COVID-19 eruption as we approach the middle of 2022.”

China’s fell 11.1% in April from a year earlier, more than the 6.1% forecast forecast in one survey; Contrary to expectations of a slight increase of 0.4%, it fell 2.9% in April from a year earlier; It reached a new high of 6.1% in April in the country’s 31 largest cities, according to data from at least 2018.

Data for oil took on new meaning, as China also announced that it had processed crude oil by 11% less in April a year earlier, the lowest daily production since March 2020, as refineries reduced operations due to widespread demand for COVID. 19 locks.

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“The more gloomy and complex international environment and the more shocking expectations of the COVID-19 epidemic domestically, the new downward pressure on the economy continues to grow,” China’s Bureau of Statistics said in a statement.

The bureau said the impact of the COVID was temporary and that the economy was “expected to stabilize and recover”.

In New York (12 hours Singapore) crude oil prices rose as much as 1% on Monday at 12 noon before reversing the downward trend to trade at 1.5%.

The London-listed barrel, which traded at $ 111.55 last week, rose to $ 112.68 in early trade and fell to a session low of $ 109.51.

The U.S. crude oil (WTI) quoted in New York was $ 110.49 last Friday. On Monday, Asian stocks rose to $ 109.80 and then fell to $ 106.72.

“The $ 98 WTI so far has proven to be a solid base, while maintaining the $ 104-106 pace,” said Sunil Kumar Dixit, skcharting.com’s chief technology strategist.

“Slight volatility from $ 106- $ 104 will attract more buyers, while weakness below $ 104 will push oil to $ 101- $ 99.”

Dixit said a decisive break below $ 98 would invalidate the bullish pace.

“It could trigger a revision for $ 18- $ 20, exposing WTI to $ 88 and $ 75 in the medium term.”

Amid rising rates of aggression by the Federal Reserve to tackle the worst inflation in 40 years, global supply of crude oil continued to plummet, with US $ 4.50 per gallon and diesel over $ 6 per gallon. Will change for oil in the country.

The current gross difference between crude oil and refined oil prices is the result of increased supply shortages, with demand having almost returned to pre-epidemic peaks. Diesel stocks on the U.S. East Coast plummeted to the lowest level since 1990. Oil filtration capacity outside China and the Middle East has fallen by 1.9 million barrels per day since the end of 2019, marking the biggest drop in 30 years. European diesel supplies have also been hampered by Western sanctions on Russian energy supplies.

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This week’s US economic data will be closely watched as investors try to measure whether the central bank’s aggressive austerity measures to control rising inflation will turn the economy into a smooth or hard downturn.

Tuesday’s April retail figures are expected to show tangible gains, thanks to steady vehicle sales. Despite rising inflation, economists predict that it will rise to 0.8% after 0.7% in March.

Along with reports on the U.S., and regional data on production activity will also be released. Home data is expected to cool as mortgage rates rise.

The central bank chairman will speak on Tuesday and is expected to reiterate that the US Federal Reserve will raise rates by half a percentage point at each of its next two meetings.

Other central bank representatives for the week include the chairman of the Central Bank of New York, the chairman of the St. Louis Fed, the chairman of the Philadelphia Fed and the chairman of the Chicago Fed.

Meanwhile, gold rose to a three-month low in the previous session on Monday as lower US Treasury yields outpaced demand for zero-yield gold by key psychological support of $ 1,800 an ounce.

Gold Daily

COMEX gold futures traded at $ 1,806 / oz, down $ 16.40 or 1%, after reaching $ 1,808.20 / oz on Friday. Friday’s session was at a low of $ 1,797.45, which has not been seen since January 30. Gold ended 4% lower last week in June.

Skcharting.com’s Dixit said gold could return to $ 1,700 territory if it fails to break the continued resistance between $ 1,836 and $ 1,885, despite recovering from a low on Friday.

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“As the current trend has become paradoxical, sellers are more likely to test these resistance zones,” said Dixit of Sporting, which uses the spot gold price for its analysis.

“As the price of gold is lower in the short term, it will reach $ 1,800 and $ 1,780 – $ 1,760. A decisive decision may increase the limit to $ 1,880, otherwise the bear pressure will push gold towards $ 1,800- $ 1,780. It will fall to $ 1,760 in the coming week.”

But if gold breaks and stays above $ 1,848, its rally could extend to $ 1,885 and $ 1,900, he added.

In wheat, India initially announced a blanket ban on wheat due to shortages in domestic supply. But then he said at the government level he would open a window to export grains to countries with food shortages.

Wheat for July delivery on the Chicago Stock Exchange rose to $ 12.49 a bushel after the ban, up from $ 12.98 in March 2008, just months before the financial crisis of that year.

“Wheat’s long $ 2 consolidation closed a firm break above the $ 11.50- $ 11.80 level and stood at $ 12.00 perch during the week with strong momentum,” Skcharting’s Dixit said.

“If a sustained rally continues above the $ 12.00 mark, prices are expected to move into the $ 13.50- $ 14.00 range.

Disclaimer: Parani Krishnan uses many other ideas besides his own to bring diversity to his analysis of any market. In the interest of neutrality, it sometimes offers different and different views of the market. It does not occupy positions in writing materials and papers.