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1. BNP Paribas: Expects the Bank of England to raise interest rates by 25 basis points in November, down from its previous forecast of a September hike. 2. Reuters: Economists unanimously predict the Bank of England will keep rates unchanged in September, with most believing a rate cut is more likely than a hike next year. 3. Evercore ISI: The UK market is clearly pricing in a divergence between policy expectations and market expectations. The market has already priced in approximately 4.5 rate hikes over the next year, but the Bank of England remains reluctant to raise rates. 4. Goldman Sachs: Market pricing in the Bank of England remains too hawkish. It expects the bank to keep rates unchanged for the remainder of 2026 before starting rate cuts in 2027. 5. Citigroup: Expects the Bank of England to raise rates by 25 basis points each in the fourth quarter of 2026 and the first quarter of 2027, down from its previous forecast of rates remaining unchanged until the second quarter of 2027. 6. Franklin Templeton: With a cooling labor market and a weakening economic outlook, UK government bonds are currently attractive, and future policy may be more accommodative than the market prices. 7. JPMorgan Chase: Expects to hold rates steady this week to avoid further reinforcing market expectations of a rapid tightening cycle, but a rate hike is anticipated in November, as energy price movements suggest inflation may peak at 3.9% by February next year. 8. HSBC: There is currently insufficient evidence to prompt members of the Monetary Policy Committee to change their voting intentions. Therefore, as things stand, the majority is expected to maintain the current rate. 9. ING: Expects the Bank of England to maintain the interest rate at 3.75% by a 6-3 vote on September 17th, with rate cuts in April and November next year, although these cuts may be delayed. The QT program is expected to decrease to £50 billion over the next 12 months, down from £70 billion last year. 10. Danske Bank: The baseline scenario remains unchanged until the second quarter of 2027, at which point a rate-cutting cycle will resume. The vote tonight is likely to be 6-3. However, if energy prices remain high and the economy remains resilient, the Bank of England may eventually raise rates even if inflation has not yet spread significantly. 11. Oxford Economics: Given the limited impact of the second round of inflation, there is room to maintain interest rates. Green, Pierre, and Mann are expected to continue supporting a rate hike, with the vote remaining 6-3. Despite soaring oil and gas prices, most members are likely to remain patient and maintain a hawkish stance rather than an immediate rate hike.The governor of Rostov Oblast, Russia, said that about 50 drones were shot down in the large-scale attack on Rostov by Ukraine.Volvo Cars: Plans to launch 13 new models between now and the end of 2030.Volvo Cars aims to achieve 30% parts commonality and reduce raw material costs by 5% by 2030.On September 17th, Goldman Sachs stated that gasoline prices are poised for further increases as tight supply conditions spread in the global fuel market. The bank has adjusted its trading strategy, shifting its focus from diesel to this widely used vehicle fuel. Analysts, including Yulia Zhestkova Grigsby and Daan Struyven, noted in a report: "The key reason behind this new recommendation is that refiners are shifting production from gasoline to diesel, leading to a rapid tightening of the gasoline market supply." In a report dated September 16th, analysts stated that while diesel prices may still rise further, gasoline currently offers "greater upside potential" due to factors such as more resilient demand and relative inventory changes. Therefore, the bank closed out previous positions on different diesel contract spreads (i.e., time spreads) and recommended establishing long positions in European gasoline targeting mid-2027.

Oil Price Fundamental Weekly Forecast-- Heightened Volatility Puts New Pressure on OPEC+ to Act

Kayla Cooke

Dec 21, 2021 15:07

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U.S. West Texas Intermediate and international-benchmark Brent crude oil futures struggled all week as rising cases of the Omicron coronavirus variation raised worries that new restrictions may hit fuel demand.

 

For bullish speculators, these battles are most likely to continue this week as Omicron continues to spread at a fast pace, developing concerns that federal governments' will enforce brand-new limitations to avoid medical facilities from being overwhelmed by new patients.

 

This is likely to result in demand destruction at a time when U.S. production is expected to increase. Merely stated, low demand, high supply is bearish so traders have to make position modifications by offering. This is likely to continue till rates hit a value zone or up until traders rate in damage expectations.

 

This wasn't the case at the start of the week when OPEC stayed upbeat on 2022 oil demand, even stating Omicron effect will be mild. However, by the end of the week, the price action showed traders were leaning more toward the projection from the International Energy Administration, which showed oil supply would top demand.

 

Recently, March WTI petroleum futures settled at $70.35, down $0.87 or -1.22% and March Brent petroleum completed at $73.52, down $1.39 or -1.89%. The United States Oil Fund ETF (USO) closed at $50.74, down $1.13 or -2.18%.

 

Will New Developments Force OPEC to Make Lower Modifications to Demand Projection?

 

Last Monday, OPEC raised its world oil demand projection for the very first quarter of 2022 and stayed with its timeline for a go back to pre-pandemic levels of oil usage, stating the Omicron coronavirus version would have a mild and brief effect.

 

In a monthly report, OPEC said it expects world oil demand to average 99.13 million barrels each day (bpd) in the very first quarter of 2022, up 1.11 million bpd from its forecast last month.

 

" Some of the healing previously expected in the 4th quarter of 2021 has been shifted to the very first quarter of 2022, followed by a more stable recovery throughout the second half of 2022," OPEC stated in the report.

 

" Moreover, the impact of the brand-new Omicron variation is forecasted to be mild and short-term, as the world becomes better equipped to manage COVID-19 and its related obstacles."

 

IEA Says Demand will Temporarily Slow, but Oversupply is New Concern

 

A surge in COVID-19 cases and the emergence of the Omicron variant will dent international demand for oil, the International Energy Agency (IEA) stated last Tuesday, however the more comprehensive picture is one of the increasing output set to top demand this month and skyrocket next year.

 

" The rise in new COVID-19 cases is expected to briefly slow, but not upend, the recovery in oil demand that is underway," the Paris-based IEA said in its monthly oil report.

 

" New containment determines put in place to halt the spread of the virus are likely to have a more muted impact of the economy versus previous COVID waves," it stated.

 

On the other hand, the United States will account for the single greatest increase in output for a second month running, the IEA said, as drilling gets there. Next year, Saudi Arabia and Russia might likewise set records for annual production if the OPEC+ group to which they both belong completely unwinds its agreed production curbs.

Weekly Outlook 

While brand-new Omicron cases overcome the global economy, we expect demand to take a hit. Most likely not as bad a formerly reported demand destruction, but enough for OPEC and its allies to take notice. When the group was formed, it cited rate stability as one of its requireds.

 

At its current conference in early December, OPEC+ reconfirmed its production adjustment plan and raised regular monthly total production by 400,000 barrels per day in January 2022. It likewise said that members agreed that the "conference will stay in session pending further advancements of the pandemic and continue to keep an eye on the market closely and make changes if needed."

 

If costs continue to decrease or volatility remains at heightened levels, I would not be shocked if OPEC+ hands down the expected 400,000 barrel daily increase at its January 4 conference.

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