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Dubai TV screen hosted Mohammed Hashad, Director of Research and Development Department at Noor Capital and member of the US Association of Technical Analysts, to comment on investors’ being more cautious, watchful, and anticipating in the crude oil market, particularly in light of the current developments in Ukraine and the continued progress at the level of the Iranian nuclear agreement negotiations, and whether oil prices are getting prepared to move towards the of $100 per barrel level, amid record levels of demand for oil this year worldwide, Hashad explained that the most prominent key words in the markets now include the “Iranian nuclear agreement” and the ongoing discussions between the US side and Iran, in addition to the escalating geopolitical tensions in Ukraine and Eastern Europe.
With a close look at oil prices, it turns out that oil has achieved gains since the beginning of 2022, surpassing a total increase by about 20%, so the markets witnessed how oil prices have recorded highest level for long periods as a result of the ongoing tensions, but from time to time, there is no indication so far that any development or progress is materialized on the ground regarding the nuclear agreement, and with regard to Eastern Europe.
There is an intention to conclude an agreement between the American and Russian sides, which contributed to alleviating the fears that were prevalent in the markets. We witnessed a good and calm start of transactions at the beginning of the new week, and concerns actually decreased, therefore oil prices came under pressure, to record some marginal declines, but we cannot say that oil may go further, i.e. to the level of $ 100 a barrel.
Hashad also believes that oil in the first half of this year 2022 will face more challenges in addition to the significant increase in the number of drilling rigs, and the stockpiles that declined last week below market expectations versus the previous three weeks’ readings.
Hashad believes that negative pressure is still present on the market’s scene, and from time to time oil prices will be subject to pressure, but the markets are awaiting what will happen as regards the Russian-Ukrainian crisis, as the existence of any peaceful solutions to the crisis would put oil prices under more pressure.
As for gold, whose prices have exceeded highest levels in eight months, and whether prices are expected to move towards $ 1900 per a troy ounce, expectations of what will happen in the near future, and whether gold prices could move towards the level of $ 1919 per an ounce, Hashad pointed out that gold is one of the investment tools that benefited the most from the current tensions and fears that dominate the markets, indeed we saw an ounce of gold exceeding the $ 1900 level, last recorded eight months ago.
Hashad suggests that there is great pressure due to the escalation of inflationary pressures, and the markets are eying the Federal Reserve’s preparedness to hike the interest rates four times during 2022, bringing about more negative pressures on gold prices, because the increase in interest rates, which in turn will lead to a rise in the cost of the alternative investment opportunity represented in the possession of bullion of the precious metal, but until now, the intraday trend is still present and if gold price exceeds $1915 an ounce, with tensions gaining momentum again, we will move towards the $1915 level.
With regard to raising the interest rate, whether it is possible for that the Federal Reserve to hike the interest rate more than twice, and in light of some opinions, such as Goldman Sachs speaking about raising their expectations from 5 to 7 times, whether this could impact the performance of inflation, inflation levels and the current attempts to contain inflationary pressures, and how the decision to hike interest rates could influence the performance of US equities, Hashad explained that the Federal Reserve is obliged to raise the interest rate in order to contain inflation, which has reached its highest levels since 1982.
Hashad also suggests that hiking interest rates four times may be appropriate for the markets, albeit a relatively large number, but raising the interest rate by more than this limit, that is, more than four times may lead to the the exit of capital from emerging markets, and this in terms of impact, but in terms of US stocks, high interest rates create an unfavorable climate for investments because it raises the cost of borrowing and thus affects the profitability of companies. Hashad believes that if the interest rate is raised three or four times in 2022, US stocks will face further declines.
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