As per our previous article, the Saudis cut oil production, but the oil markets remain in a downtrend. This weakness is ominous and primarily reflects the demand destruction. In effect, the outlook for global growth has deteriorated due to the tightening of monetary policies in force. Central banks are desperate to reverse the fastest inflation since the early 1980s.
Moreover, China's covid lockdowns have hindered its economy. Given that it has been a major part of global growth in the 21st century, this has a ripple effect. But, perhaps, one of the biggest influences has been the strong dollar. Whilst a boon for US energy consumption, this impedes other countries whose currencies have devalued against the greenback.
These headwinds made the Saudi cut nothing more than a token price-support gesture. As a result, any brief rally in oil prices has faded, and the outlook continues to darken.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.