30 March 2021

Crude Oil Ends Higher as Suez Traffic Resumes

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News shaping
the markets today

     

What’s happening: Crude oil ended higher on Monday amid a broader improvement in investor sentiment on news of the container ship blocking the Suez Canal being re-floated.

What happened: Markets and various companies around the world breathed a sigh of relief when the Suez Canal Authority reported that Ever Given, which ran aground last Tuesday, had been successfully freed.

Investors shifted their attention to speculations around the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) group meeting, scheduled for later this week.

Why it matters: Since Tuesday last week, Ever Given, one of the world’s largest container ships, had blocked the Suez Canal, which serves as a passage for an estimated 12% of global goods including crude oil. The blockage had caused more than 400 vessels to wait for passage through the canal, resulting in an estimated loss of $400 million per hour.

The release of the container vessel on Monday allowed ships to pass through the canal, although further delays are expected due to heavy traffic congestion. The resultant increase in freight rates, which had caused commodity prices to move, is expected to normalise in a few weeks.

With the Suez Canal incident in the rear-view mirror, investors turned their focus on the OPEC+ group, which is scheduled to hold a technical committee meeting on Wednesday, followed by a meeting on Thursday when it will announce output levels for May.

Russia is expected to support a rollover of the output cuts into May but request a small increase for itself. Earlier this month, the OPEC+ had announced plans to carry forward their March production cuts into April.

Traders remained concerned about another wave of covid-19 infections in Europe and the US reporting a rise in new infections in several states.

Crude prices for both benchmarks had traded lower for most part of the session on Monday but settled higher at the end of the day. WTI crude for May delivery gained 1% to close at $61.56 per barrel on the NYMEX (New York Mercantile Exchange) on Monday, notching the strongest finish since March 17. May Brent crude rose 0.6%, to end at $64.98 per barrel on ICE Futures Europe.

Prices for other petroleum products traded mixed on Monday, with April gasoline adding 1.4% and April heating oil closing almost flat at $1.81 a gallon.

What to watch: Markets await the API’s (American Petroleum Institute) report on crude inventories scheduled for release today. US crude oil stockpiles rose 2.927 million barrels in the week ended March 19, following a 1.047 million decline in the prior week.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections surging past 127.5 million.

The Markets Today

     

US stocks will be in focus today, ahead of a basket of economic reports scheduled for release today.

Context: US stocks closed mixed on Monday, with the Dow Jones index scoring an almost triple-digit win, despite losses for big banks.

Details: Financial stocks traded lower on Monday, following news of a forced liquidation of positions held by Archegos Capital Management.

Shares of Credit Suisse and Nomura tumbled, with investors expecting the companies to take a significant hit from the hedge fund's default on margin calls.

Market sentiment has so far been supported by expectations of a sharp economic recovery due to covid-19 vaccinations and continued support from the US government. Despite this, tech stocks have been under pressure due to concerns over a rise in inflation.

Investors are likely to brace for heightened volatility during this holiday-shortened week, with the Dow and S&P 500 having surged around 7.2% and 4.2%, respectively, so far this March. Equity markets will remain closed on Friday for the Good Friday holiday, although investors will keep an eye on the jobs data for March, which will be released that morning.

Markets also await the unveiling of President Joe Biden’s infrastructure plan on Wednesday.

The Dow Jones index rose 98.49 points to close at 33,171 on Monday, after shedding as much as 160 points earlier in the session. The 30-stock index notched gains for the third straight session, shaking off losses from big banks amid Hwang's Archegos Capital Management liquidation news.

The broader S&P 500 index slipped 0.09% to settle at 3,971.09, while the Nasdaq 100 ended the day 0.1% lower at 12,965.74.

What to watch: Markets await data on S&P home price index, FHFA’s house price index and CB’s consumer confidence index. The S&P CoreLogic Case-Shiller 20-city home price index, which surged 10.1% from a year ago in December, is expected to jump 11% year-over-year in January. The CB’s consumer confidence index is likely to increase further to 96.9 in March, from the previous reading of 91.3.

Other Markets: European trading indices closed mostly higher on Monday, with the German DAX 30, French 40 and STOXX Europe 600 up by 0.47%, 0.45% and 0.16%, respectively. The FTSE 100 bucked the trend and closed lower by 0.07%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France’s consumer confidence indicator, Spain’s consumer price index, retail sales and industrial confidence indicator, Italy’s producer prices, Eurozone’s economic sentiment indicator, consumer confidence indicator, ¸, industry confidence indicator and services confidence indicator, Germany’s inflation rate, Saudi Arabia’s balance of trade, Canada’s average weekly earnings, Argentina’s current account as well as the US Redbook index.

 

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