CME Market Sentiment Meter Historical Market Analyses – September 14, 2019 Abqaiq-Khurais Attack
By Anish Verma
In the year 2019, daily settlement prices (most active expiry) for WTI Crude Oil futures (CL1) rose as tensions with China and Iran grew from January to April. During this period, the Market Sentiment Meter (MSM) indicated Balanced market states.
Following a period of Conflicted market states in May, CL fell from 63.21 USD/bbl to 51.14 USD/bbl. The market state became Anxious and CL began to rise. In August, the prospect of trade talks diminished and the market state was Balanced. The MSM indicated that the market state remained Balanced for the rest of 2019.
On September 14th, 2019, there was a drone attack on the Saudi Aramco facilities located in Abqaiq and Khurais, Saudi Arabia. There was a rise in CL from 54.85 USD/bbl to 62.9 USD/bbl. The market state was Balanced prior to the attack. The risk-return the curve became skewed immediately after the attack. However, the market state remained Balanced. This rise in price was short-lived and fell the following day, a period of Balanced market states.
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The CME Market Sentiment Meter (MSM) provides a daily risk–return estimate for eight products traded on CME Group exchanges: corn (C), crude oil (CL), euro/USD FX (EC), S&P 500 index e-minis (ES), gold (GC), natural gas (NG), soybeans (S), and 10-year treasury notes (TYF). The Market Sentiment Meter is computed by 1QBit using end-of-day settlement data published by CME Group. It is available as a subscription product through CME DataMine.
Periods of Anxious market states for COMEX Gold futures (GC1) tended to be either short-lived or long-lived in the eight-year period ending in December 2019.
In 2018, the U.S. saw economic growth and the Federal Reserve hiked rates four times during the year. The year was dominated primarily by Balanced market states, and GC consistently fell once the rate hikes were announced.
The year 2019 saw slowed economic growth and increased tensions with China, Iran, and Russia. This led to a large rise in GC from July to November, and GC remained at a high relative to the beginning of the year. In 2019, the Federal Reserve made three rate cuts. During this time, the Market Sentiment Meter (MSM) indicated an extended period of Anxious market states from July to November.
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