Noor Capital | Interview with Muhammad Hashad on the Dubai TV – December 05, 2022

https://www.youtube.com/watch?v=44YX52n-6nIIn an interview on Dubai TV, Mohamed Hashad, Head of Research and Development at Noor Capital and member of the US Association of Technical Analysts, commented on the most important developments in the financial markets, most notably the following:

Oil Prices

Muhammad Hashad – at the very beginning – commented on the agreement by European Union officials for setting price cap on Russian oil exports, while Russia still opposes the decision and considers it an unsafe intervention with consequences that could destabilize the markets. Hashad indicated that the European Union’s decision, which entered into force today, Monday December 5, is in line with the direction of the G7 by the major industrialized countries to set a price cap of $60 per barrel on all shipments of Russian oil transported by sea. Shipping, insurance and reinsurance companies are ordered to abstain from dealing with any Russian oil shipments above the set price all over the world, and the main goal of such an additional sanction was to restrict Russia’s oil exports and deprive Moscow of the revenues from those exports, as well as the revenues from the sale of Russian oil. Hashad believes that the Russian side has mechanisms to counter the impact of the European decision, and the details of those mechanisms may become clearer and the markets will witness them in the coming days, but there is a Russian objection to the decision because Moscow considers it as a violation by EU of the World Trade Organization’s rules, and that oil prices are supposed to be left to be determined according to the levels of supply and demand without political interventions.

Hashad believes that the European decision will have negative effects on the Russian side, and Moscow may be forced to reduce its oil production by about two million barrels per day until the end of the first quarter of the year 2023, and may even be forced to reduce its production even below the levels agreed upon with OPEC. The coming hours or days could carry news on ban on exporting Russian oil to Europe, meaning that Russia will soon begin its search for new partners in the oil markets.

Asked about the impact of these factors in general on oil prices and energy markets, Hashad suggested that oil prices are supposed to receive a boost in the wake of these developments because they directly lead to a decline in oil supplies, but it is clear so far that oil prices practically did not respond quickly to the news related to the European decision.

Commenting on oil price expectations according to the “Bank of America,” which indicated that the price of crude oil may surge to $110 per barrel during 2023, and whether that is likely to happen, Hashad replied: “With the continued political and geopolitical tensions and their repercussions on the markets, the surge of oil up to $110 a barrel may be a possibility, but none should forget that there are great fears in the markets about the dilemma of declining supplies, but “we must take into account the fact of the slowdown that major economies are going through at the present time, and this slowdown would limit the rise in oil prices. However, it is still possible to see the price of a barrel of oil above $110”.

Fed’s next interest rate decision

Regarding his expectations for the Federal Reserve meeting later this month, and whether it could decide to raise the interest rate by around 50 basis points, Hashad suggested, according to all current data and in light of the current economic conditions, that the door is still open to increasing the interest rate by 75 basis points, and that In light of several specific facts, including that the US labour market is still robust, in addition, the US economy was able to add 263,000 jobs, in a reading that was stronger than expectations, and maintained unemployment rates at 3.7. There is clear growth in wages, and these factors combined, Hashad believes, may push The Fed to hike interest rates by 75 basis points in order to contain inflation.

“Although inflationary pressures have receded over the past month, we cannot found our judgment on inflation on the basis of only one month’s reading, and then we have to wait until the PPI data is released this week, which is the most important data of all”, Hashad added.

Hashad also believes that in the event that inflation does not respond to raising interest rates, the path of raising interest rates may be extended by the Fed till the beginning of next year, in order to reach the target level of 2%.

Gold

Gold prices are approaching a 5-month high, and about the reaction of gold prices to the Fed’s possible decision to raise interest rates by approximately 50 basis points, in light of what is well known about the effect of low interest rates on supporting gold prices, Hashad indicated his expectations that gold will trade above 1850 dollars an ounce, because the decline in interest rates leads to a weaker dollar and thus reduces the cost of holding gold against the dollar compared to holders of other currencies, as the markets may witness new levels of gold above 1850 dollars an ounce.

US dollar

Asked about the expected path of the US dollar, and where it could be underpinned or otherwise fall amid expectations of raising the interest rate, which is expected with the awaited decision during the US Central Bank meeting later in December, Hashad indicated that many data is governing the price movements of the US dollar, including the Federal Reserve’s decision in its next meeting as well as inflation levels that are still high, so Hashad believes that the US dollar still has more opportunities to rise during the coming period, and the markets may witness a rise in the dollar in the wake of any decline it records, according to technical analysis. As for the main factor that may cause the dollar to decline, according to Hashad, it could be slowing the pace of raising interest rates, then the markets may witness a weaker dollar.