Mountain Tech Analysis

Written 02/03/2023

Australia

• Present inflations too high at its yearly average of 7% in Australia and with a 3.35% RBA interest rate presents a challenge to households.

USD

• The USD is the worlds reserve currency and the most stable and liquid currency for global trade as hard majority of commodity trade is done in USD globally.So for us to see where we are heading to , we have to follow the economic data from the FED .
• USD annual inflation at 6.4% vs  4.75% as at start of 2023.
• The Fed interest rate was lifted to the current rate from the March 2022 low of 0.1% to bring down inflation and M2.It did achieve its goal partially , as inflation lowered from 8% nominally in US to 6.4% 
• These FED moves and the selling off the US Strategic Petroleum Reserves helped bring down the price oil at the pump which in turn helped bring down the winter fuel prices globally from the March 2022 peak of WTI $130 to the December 2022 lows of $70. 
• Currently WTI is at $75 with its current stockpile of SPR of 370 million barrels of oil, down from the high of 650 million , 3 years ago. 
• Since then the SPR has been slowly getting smaller with the biggest slide seen since the start of the Russian/Ukranian war in February 2022 , since then it has fallen from 590 million to the current 370million barrels of oil.The FED actions with EU’s December 2022 price cap on Russian crude at $60 kept the global price at bay .WTI has since December hovered around the $70-75 area. Whilst Brent has been hovering around $75-88

What Caused the price of oil to spike up so high?

• WTI fell to its lows of $11 on the spot market at April 2020 when lockdowns began and the economic future was gloomy.But since then the panic stopped and things got back to normal , oil climbed on a slow upwards trajectory towards $85 ,that was until the war began and it reached $130 in March 2022.
• Many say it’s because of the war, that’s the case but only psychologically ,as fear and panic set in on the global markets.  Before that Russia sold its oil at discounted prices to European countries through long term contracts and transferred the oil through its pipelines in the Eastern Europe and nordic countries. But then many of these countries promised to stop buying Russian oil and gas and instead went on global markets to buy shipped gas through tankers from USA,Canada and Gulf countries which was much pricier through the open markets.Not only that but they had to compete with Asia which bought its gas at higher prices compared to Europe as shipping gas is a much costlier endeavour compared to gas transferred through pipelines. 
• Natural gas is around $3 per mmbtu right now, coming down from $10 since the start of the war .Global increased production and the weak winter in Europe helped ease the pressure from the price.