15 April 2021

Crude Oil Strongest Since Mid-March

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News shaping
the markets today

     

What’s happening: Crude oil recorded sharp gains on Wednesday, notching the highest finish since mid-March.

What happened: Recent demand updates from several agencies signalled increased uptake of oil as the global economy rebounds from the covid-19 pandemic.

Oil prices were also supported by the US government’s report showing a third weekly decline in crude inventories.

Why it matters: In its monthly report, the IEA (International Energy Agency) boosted its global oil demand outlook for 2021 by 230,000 bpd (barrels per day). The agency said it now expects a rise of 5.7 million bpd from 2020 to 96.7 million bpd this year.

On Tuesday, the OPEC (Organization of the Petroleum Exporting Countries) also raised its 2021 demand outlook on hopes of the pandemic subsiding. The group is now projecting global oil demand to surge by approximately 6 million bpd to reach 96.5 million bpd this year. The OPEC also boosted its global economic growth forecast for 2021 from 5.1% to 5.4%.

"As the spread and intensity of the COVID-19 pandemic are expected to subside with the ongoing rollout of vaccination programmes, social distancing requirements and travel limitations are likely to be scaled back, offering increased mobility," OPEC said.

Investors also cheered the EIA’s weekly report released on Wednesday, which showed a decline in US crude inventories for a third consecutive week, with stockpiles falling by 5.9 million barrels in the week ending April 9. The decline was higher than the consensus estimate of 2.9 million barrels. The EIA’s report followed the one released by the API (American Petroleum Institute) on Tuesday, which also showed a decline of 3.6 million barrels in crude inventories.

WTI (West Texas Intermediate) crude for May delivery spiked 4.9% to close at $63.15 per barrel on the NYMEX (New York Mercantile Exchange) on Wednesday, after ending above the $60 mark in the previous session for the first time since April 1.

Global benchmark Brent crude for June jumped 4.6% to settle at $66.58 per barrel on ICE Futures Europe. Both WTI and Brent prices recorded their strongest finish since March 17.

The EIA also reported a rise in gasoline supply of 300,000 barrels last week, versus market expectations of a decline of 200,000 barrels. Despite this, May gasoline gained 3% to around $2.04 per gallon on Wednesday.

What to watch: Traders will continue to monitor global oil demand. Although markets witnessed evidence of a sharp economic rebound in the US and China this week, concerns remain around the surge in covid-19 cases in several parts of the world. Investors will keep an eye on news related to vaccine rollouts, including developments around the temporary halt in Johnson & Johnson’s vaccine.

The Markets Today

     

The Canadian dollar will be in focus today ahead of a basket of economic reports from the country.

Context: The CAD/USD forex pair traded slightly higher today with sharp gains in oil, one of Canada's major exports.

Details: The US dollar fell versus a basket of major currencies on Wednesday, while crude oil jumped following encouraging data from the International Energy Agency and US Energy Information Administration.

Traders keenly await the Bank of Canada’s meeting scheduled for next week, in which the bank is widely expected to announce its decision to lower bond purchases by C$1 billion a week. To make this decision, the central bank will consider various aspects, including the current strength in the housing market and a return to lockdown measures in some provinces due to a spike in covid-19 infections.

Canada's government is also set to disclose its first budget in two years, next week. Markets look forward to big spending announcements amid another wave of covid-19 cases and elections approaching.

Canada’s government bond yields traded higher on Wednesday, with the 10-year yields rising to 1.528%.

The CAD/USD climbed to $1.2517 this morning, after settling at 1.2521 on Wednesday.

What to watch: Markets await data on ADP employment change, manufacturing sales and industrial product price index from Canada. Private businesses in the country, which shed 100,800 jobs in February, are expected to cut another 25,000 jobs in March. Canada's manufacturing sales are projected to decline by 1% in February, after growing 3.1% in the prior month.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 138 million.

Other Markets: European trading indices closed mostly higher on Wednesday, with the FTSE 100, French 40 and STOXX Europe 600 up by 0.71%, 0.40% and 0.19%, respectively, while the German DAX 30 index declined by 0.17%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany's consumer price inflation, Saudi Arabia’s inflation rate, India's wholesale prices and balance of trade, France’s inflation rate, Italy’s inflation rate, Spain's balance of trade, Turkey’s foreign exchange reserves, central government budget balance and Central Bank of Turkey’s interest rate decision, Bank of England’s credit conditions survey, South Africa’s value of recorded building plans passed, Russia’s industrial production, Australia's new home sales, China’s foreign direct investment, Argentina’s inflation rate, as well as the US retail sales, New York Empire State manufacturing index, Philadelphia Fed manufacturing index, initial jobless claims, industrial production, manufacturing production, NAHB housing market index, business inventories and EIA’s natural gas stocks.

 

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