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What’s happening: Crude oil settled higher on Friday, following strong economic reports from the Eurozone and UK.
What happened: Oil prices recovered on Friday after shedding more than 2% in the previous session.
Despite Friday’s gains, crude recorded losses for the week amid concerns around interest rates.
Why it matters: On Thursday, both crude oil benchmarks, Brent and WTI, fell to their weakest levels since the surprise announcement of output cuts by some OPEC (Organization of the Petroleum Exporting Countries) members in early April.
Oil began trading on Friday in the negative zone but reversed course after the release of data showed Eurozone’s economic recovery gathering pace in April.
Demand accelerated in the region’s services sector, offsetting a downturn in the manufacturing sector. The Eurozone’s HCOB services PMI climbed to 56.6 in April, from 55 in March, signalling the strongest growth in the bloc’s services activity since April 2022. Eurozone’s manufacturing PMI declined to 45.5 in April, from 47.3 in the previous month.
The UK also recorded acceleration in business activity. The British services PMI rose to 54.9 in April, climbing to a 12-month high, while composite PMI improved to 53.9 in April, significantly topping market estimates of 52.5.
Oil prices also received support from tighter supply, due to the OPEC’s lowered production targets and higher demand from China. Some weakness in the US dollar also lent support to oil prices on Friday. Any decline in the greenback makes oil cheaper for foreign currency holders.
Baker Hughes said on Friday that the total number of active US oil rigs had increased by 3 to 591 during the week. The Energy Information Administration had reported a decline in US crude inventories by 4.581 million barrels in the previous week, much higher than market expectations of a decline of 1.088 million barrels.
Concerns around interest rate hikes by central banks and the uncertain global macro environment limited the overall gains for crude oil, which ended the week in the red.
Brent futures for June delivery gained 56 cents to close at $81.66 per barrel on Friday, while WTI crude for June delivery added 50 cents to settle at $77.87 per barrel. Oil prices recorded a weekly decline of more than 5%.
In other energy trading, wholesale gasoline for May delivery added 1 cent $2.60 a gallon, while May heating oil remained almost flat at $2.49 a gallon. May natural gas fell 2 cents to $2.23 per 1,000 cubic feet on Friday.
What to watch: Traders will keep an eye on comments from major central bank officials, with the US Federal Reserve, the European Central Bank and the Bank of England expected to increase interest rates at their meetings next month.
Context: Bitcoin fell below the $28,000 level on Friday, recording losses for the third straight session.
Details: Crypto traders remained cautious on Friday amid prospects of interest rate hikes by major central banks. Federal Reserve officials hinted at another rate hike at their policy meeting in May, which provided a boost to the US dollar. Strengthening of the greenback exerts pressure on Bitcoin.
The world’s largest cryptocurrency by market capitalisation lost around 10% in the week, after being shorted for the third straight session on Friday.
The pressure on Bitcoin dragged the rest of the crypto market lower, taking the overall market valuation below $1.2 trillion. The world’s second-largest cryptocurrency, Ethereum, fell below the $1,900 level on Friday, after surging past the $2,100 mark earlier during the week.
Markets also assessed news related to cryptocurrency, with the European Parliament lawmakers passing comprehensive legislation to regulate the crypto market.
What are expectations: Markets will keep an eye on data showing the state of the global economy, which could provide direction to crypto prices this week. Traders will also continue monitoring comments from central bank officials regarding their monetary policies.
Other Markets: European indices closed higher on Friday, with FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.15%, 0.54%, 0.51% and 0.34%, respectively.
Russia’s military forces have captured more territory in Ukraine’s Bakhmut region. Despite the geopolitical tensions, the safe-haven US dollar index fell slightly this morning.
Paraguay’s central bank held its policy rate at 8.5% at its April meeting, which exerted some pressure on the PYG/USD forex pair.
Colombia’s trade deficit shrank to $0.9 billion in February, from $1.6 billion in the year-ago month, sending the COP/USD pair slightly higher in forex trading this morning.
Canada’s retail sales contracted by 0.2% in February, after 1.6% growth in January. The news exerted pressure on the CAD/USD forex pair.
US S&P Global services PMI rose to 53.7 in April, from 52.6 in March, sending the Nasdaq 100 index higher on Friday.
Turkey’s manufacturing confidence index and capacity utilization, Germany’s Ifo business climate indicator, Ifo current conditions and Ifo expectations subindex, Brazil’s current account, foreign direct investment and Central Bank of Brazil’s focus market readout, Mexico’s mid-month inflation rate, Canada’s new housing price index and wholesale sales, US Chicago Fed National Activity index and Dallas Fed manufacturing index, Indonesia’s foreign direct investments, as well as Argentina’s economic activity estimator.
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