26 April 2021

Crude Oil Records Weekly Loss on Covid-19 Concerns

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News shaping
the markets today

     

What’s happening: Crude oil futures traded higher on Friday, but recorded overall losses for the week.

What happened: The continued surge in covid-19 cases, especially in Japan and India, fuelled concerns around energy demand remaining subdued in the foreseeable future.

Investor sentiment was also hurt by prospects of oversupply, with Iranian oil possibly making its way back to the market.

Why it matters: India recorded over 340,000 covid-19 infections in a 24-hour period, notching another global record. Lockdowns were also reported in Tokyo and other regions in Japan to curb the increase in new cases.

With India being the world’s third largest oil importer and Japan at fourth position, investors remained concerned about further restrictions in the two nations impacting crude oil demand in the coming months.

“The explosion in Indian COVID cases remains one of the key near-term risks plaguing what we would deem as an otherwise reasonably constructive backdrop for investor sentiment,” RBC Capital Markets analyst Michael Tran said in a note.

Market sentiment was supported by reports of a 61.5% surge in US demand for motor gasoline to an average of 8.9 million bpd (barrels per day) in the past four weeks.

Meanwhile, at its latest meeting, the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) agreed to gradually increase crude output from May through July.

WTI (West Texas Intermediate) crude for June delivery gained 1.2% to close at $62.14 per barrel on the NYMEX (New York Mercantile Exchange) on Friday. June Brent crude added 1.1% to settle at $66.11 per barrel on the ICE Futures Europe.

For the week, US crude notched a loss of 1.7%, with Brent shedding 1%. Prices for both benchmarks have gained more than 27% so far this year.

In other energy commodities, May gasoline rose 1.1% to around $2 a gallon on Friday, recording a weekly drop of 2.2%. May natural gas fell 0.7% to $2.73 per million British thermal units on Friday but recorded a weekly gain of 1.9%.

What to watch: Investors will keep an eye on fresh covid-19 cases in India and Japan. A recovery in energy demand in some regions of the world may support oil prices. Markets will also keep an eye on the OPEC+ meeting scheduled for Wednesday.

The Markets Today

     

European stocks will be in focus today, with markets closing lower last week.

Context: European markets settled mostly lower on Friday, as investors focused on earnings releases by various companies from the region.

Details: The Eurozone released encouraging PMI data on Friday, showing a sharp recovery in economic activity. The IHS Markit’s preliminary composite PMI, which combines manufacturing and services activities, rose to 53.7 in April, from a reading of 53.2 in March.

The UK’s composite PMI also climbed sharply to 60.0 in April, from 56.4 a month ago, with the nation witnessing a phased exit from covid-19 lockdown restrictions. The country’s retail sales grew 5.4% in March, beating market expectations. Britain’s consumer sentiment also climbed to its strongest level this month since the covid-19 pandemic, according to the GfK survey. London’s FTSE index rose slightly by 0.32 points to settle at 6,938.56 on Friday.

“This morning’s PMI figures continue to show the impact of the easing of restrictions, with positive sentiment increasingly evident in the UK’s dominant service sector,” UBS Global Wealth Management analyst Dean Turner said. He added in the note, “With all sectors showing an improvement relative to March, we believe this points to further strength in the economy in the months ahead.”

Several big European companies, including Schaeffler, Air Liquide and LafargeHolcim released earnings on Friday.

The Stoxx Europe 600 slipped 0.13% on Friday, with healthcare stocks leading the decline by shedding more than 1% and most bourses also closing in negative zone. The pan-European index recorded a weekly decline of 0.8%.

The German DAX 30 index lost 0.27% on Friday, while the French 40 was down 0.15%.

What to watch: With no major economic reports scheduled for release today, investors will focus on the rollout of covid-19 vaccines.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 146.8 million.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.67%, 1.09% and 1.30%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain's producer price inflation, Turkey’s manufacturing confidence index and capacity utilization, Germany’s Ifo business climate indicator, Mexico’s economic activity index, Brazil's current account, foreign direct investment, net payrolls and Central Bank of Brazil’s focus market readout, Argentina’s retail sales, as well as the US manufactured durable goods orders and Dallas' Fed general business activity index.

 

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