- Brent Crude futures took a major tumble on Monday morning losing 6% but recovered to $41.29 a barrel – still down 4.2% since the last settlement.
- Since mid-2014, oil prices have fallen 70% due to a massive oversupply in what has shaped up to be a vicious price war.
- Commodity currencies including the aussie and the loonie felt the pinch
- And the Yen took up its expected safe haven position.
Here’s what happened
- Last Sunday the OPEC leaders met in Qatar to discuss a supply freeze but the talks quickly disintegrated as Saudi Arabia demanded that Iran should also be part of the agreement
- Regional politics seem to have come into play as Saudi and Iran have long been in competition over influence in the Middle East.
- With the talks ending in failure, the very real fear is that government-controlled producers will look to offer even lower prices, sending oil falling to fresh lows.
- Now we have a boiler-room situation where Saudi Arabia and Russia are putting out record levels, and Iran vying to get back market share after the lifting of sanctions in January
- While some analysts are not expecting to see the lows we saw earlier this year of $27 a barrel, it seems that oil is going to remain under pressure for some time.
- With all this going on for Oil, the Australian dollar lost 1% to $0.7594 and the Canadian dollar also fell 1% to $1.2986 against the US dollar.
- Investors responded to the unsettling developments and bought up the yen, sending it to 3-year highs against the euro to 121.71 yen – the lowest since 4 April 2013 when the Bank of Japan announced its quantitative easing programme.
- And against the US dollar, the yen went to an almost 18 month high of 107.63.
Coming up this week
- Check out the finance calendar on the easyMarkets site as we have a number of announcements throughout the week.
- Be sure to keep an eye out on Thursday for UK retail sales and the ECB rate decision.
Looks like we have an exciting trading week ahead. Some investors might choose to sit out the uncertainty in the markets while others will take the opportunity to make their play. What’s your strategy for this week? Comment below and let us know.