Crude oil rises as Trump rejects Iran’s peace plan

Today’s headlines

What’s happening: Crude oil prices rose sharply this morning as investors assessed the latest developments in the US-Iran war.

What happened: US President Donald Trump rejected Iran’s latest response to his proposal, raising concerns over an end of the ceasefire.

While Trump said Iran’s terms were “totally unacceptable,” Tehran warned of retaliating strongly to renewed US strikes.

Why it matters: US President Donald Trump said Iran had responded to his latest proposal through mediators in Pakistan. Trump mentioned that he did not “like it” and that the terms were “totally unacceptable.”

Iran’s Army spokesperson Brigadier General Mohammad Akraminia warned that nations supporting US sanctions could face “difficulties” in crossing the Strait of Hormuz, through which around one-fifth of global liquefied natural gas and seaborne oil transited before the war.

Iran’s Islamic Revolutionary Guard Corps also warned of hitting US positions and enemy ships, in case of attacks on Iranian ships.

Qatar’s Ministry of Defence said a drone hit a cargo vessel in the country’s territorial waters, while the UAE and Kuwait also intercepted drones, raising concerns over a collapse of the fragile ceasefire.

The UK has agreed to over 30 countries for two days of talks starting Wednesday to plan a defensive mission to protect and restart shipping through the Strait of Hormuz.

Strength in the US dollar weighed on crude oil prices this morning, as a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 98.03.

Spot price for WTI crude oil rose 3.4% to $99.41 per barrel this morning, while Brent crude rose 3.2% to trade at $108.18 per barrel.

In other energy trading, gasoline rose 1.9% to $3.5951, while natural gas climbed 1.2% to $2.789 and heating oil prices surged 2.4% to $3.9924.

What to watch: Investors will monitor talks between the US and Iran and the success of the multinational meeting in the UK.

EIA’s (Energy Information Administration) data on US crude oil stocks will be released on Wednesday. US crude inventories declined by 2.314 million barrels to 457.2 million barrels during the week ended May 1, versus market estimates of a drawdown of 3.3 million barrels. Gasoline inventories fell 2.504 million barrels to 219.8 million, while distillate stockpiles contracted 1.294 million barrels to 102.3 million during the week.

The markets today

The Canadian dollar in focus today ahead of some major economic reports this week

Context: The Canadian dollar slipped versus the US dollar this morning as investors digested the jobs data.

Details: Data released on Friday showed that employment in Canada fell by 18,000 in April compared to a gain of 14,000 jobs in the previous month. The figure also missed market estimates of a 15,000 gain, which raised speculations of the Bank of Canada refraining from tightening its monetary policy this year.

Canada’s unemployment rate surged to 6.9% in April from 6.7% in the previous month. The figure was higher than market estimates of 6.7% and signalled the highest jobless rate in six months.

Meanwhile, the US economy added 115,000 jobs in April versus a 185,000 gain in March, and sharply higher than market estimates of 62,000. The US unemployment rate remained at 4.3% in April, in-line with market estimates.

Strength in the US dollar weighed on the loonie. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 98.03 this morning.

However, higher prices of crude oil, one of Canada’s major exports, lent support to the Canadian dollar. Spot price for WTI crude oil rose 3.4% to $99.41 per barrel this morning.

The USD/CAD forex pair edged higher to 1.3687 this morning.

What to watch: Investors will continue monitoring talks between the US and Iran.

Data on new motor vehicle sales and wholesale sales from Canada will be released on Thursday. Car registrations in Canada, which rose to 124,004 units in February from 114,261 units in the previous month, are expected to decline to 119,000 units in March. Analysts expect Canada’s wholesale trade to rise by 1.3% in March versus a 2% gain in February.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.02%, 0.84% and 2.35%, respectively.

The news shaping the markets

Both Russia and Ukraine accused each other of breaching the three-day ceasefire brokered by US President Donald Trump. The news sent the USD/RUB pair lower in forex trading this morning.

Saudi Arabia’s industrial production contracted by 14.1% year-over-year in March following a 15.0% gain in the previous month, which lent support to the USD/SAR forex pair.

Mexico’s consumer sentiment rose slightly to 44.4 in April from 44.2 in March. Consumer sentiment remaining in the negative zone sent the USD/MXN pair higher in forex trading this morning.

Taiwan’s trade surplus widened to $14.35 billion in April from $7.4 billion in the year-ago month. The figure missing market estimates of $19.1 billion lent support to the USD/TWD forex pair.

Indonesia’s new car sales jumped 55.0% year-over-year to 80,776 units in April, compared to a 13.8% decline in March. However, the USD/IDR pair rose in forex trading this morning.

What else to watch today

Mexico’s auto exports (1600 UAE Time) and auto production (1600 UAE Time) as well as US existing home sales (1800 UAE Time).