As Saudi Arabia plans to stay within limits of its ceiling under the Organization of Petrol Exporting Countries (OPEC) production cut deal agreed in May, the country is not rushing to ramp up its productions for the time being. However, Donald Trump’s decision not to extend the waivers for Iran’s oil buyers including China, Japan, India and South Korea, could seriously hamper the OPEC deal and causing a huge blow to the oil monopoly’s ability to coordinate production cuts. Saudi Arabia affirms to add a few hundred thousand barrels per day above the current levels and to keep the oil production output below its ceiling as part of the OPEC+ deal. The OPEC leader, standing on its February commitment followed the same to reduce its crude oil production further and pump below 10 million BPD in March. It’s crude oil production massively dropped by 324, 000 BPD from February to 9.794 million BPD in March. China emerged quickly on hitting out at the US decision to toughen the restrictions imposed on oil exports from Iran. Iran is China’s seventh-largest crude oil supplier, accounting for about six per cent of imports of the Asian giant in 2018.
The oil market is still heading towards a bullish direction, but the path ahead is not entirely free of obstacles. While the situation seems to be difficult currently, we can expect it to be clear later this year if OPEC decides to pump more oil. The current trend in the global energy market indicates that the crude oil price will reach USD 72 BPD in the next few weeks.
The yellow metal might face bearish trend in first half of 2019, as the interest rate in United States is likely to rise. Gold price has remained bearish for most of 2018, despite the ongoing US-China trade war, instability and political tensions in the Eurozone and Britain’s Brexit fiasco. As analysed by market experts, gold has lost its safe haven appeal to the US Dollar took its place in 2018. However, last year’s gains for the greenback will reverse if the world's largest economy underperforms. Naturally, it such a scenario will boost the gold price. India is also likely to join its counterparts Russia and China in buying more gold this year. It has been predicted that the Reserve Bank of India (RBI) may purchase 1.5 million ounces in 2019, or about 46.7 tons. RBI decided to increase its stock of gold by about 42 tonnes last year, and after adding some in January and February, the country’s gold reserves now stand at a record high at almost 609 tonnes.
The relation between US Dollar and Renminbi will be the major factor to set the value of USD Index very soon. After a year of wrangling over the trade issues, the US trade representatives and their Chinese counterparts will meet in May in order to find solutions to the ongoing friction between the two countries. If the conclusion of the meet is made public, then an analysis is likely to start “Who have the more advantage?” in the trade war.
If the value of USD Index, followed by the value of greenback against many major currencies is taken into consideration, then the advantage to US seems superficial. But it is also important to note that the global economy has suffered significantly due to the trade tussle between two largest economies. The current USD Index value seems to be maintaining above 94 or even going up to 102 if the conclusions of the forthcoming US -China trade conference are made public.
India observing parliamentary elections that will form the central government for the next five years. The first phase of election is completed and in the next few months, the results will be declared. If the current Prime Minister Narendra Modi receives mandate for the next tenure to govern the world’s largest democracy, the value of INR is expected to strengthen.
India’s international trade has dual challenges in single facet. Being a fast emerging economy, India requires a contained inflation for the growth, while also to maintain its currency t lower values to increase exports. In whichever case, the Indian economy is supposed to grow at a faster pace for the next two years. The value of INR is expected to oscillate between Rs 66 to Rs 72 for the period. A break below Rs 66 will result INR to come down at Rs 62.