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Crude falls despite Russia-Ukraine talks

The news shaping the markets today

Talks between Ukraine and Russia ended on Monday without any progress. Further talks to ease the crisis are expected today, which caused the safe-haven US dollar to remain broadly flat.


China’s surveyed urban unemployment rose to 5.5% in January and February combined, compared to 5.1% in December, exerting slight pressure on the CNY/USD forex pair.


New Zealand’s Business NZ Performance of Services index climbed to 48.6 in February, from 46 in the prior month. However, the NZD/USD pair remained flat in forex trading this morning.


Brazil’s industry confidence indicator fell by 0.4 points to 55.4 in March, recording the lowest reading since April 2021, which sent the BRL/USD forex pair lower.


Russia’s trade surplus expanded to $21.17 billion in January, from $9.03 billion in the year-ago month. The RUB/USD pair was flat in forex trading this morning.

 

What’s happening: Crude oil recorded losses on Monday, as traders monitored developments in the ongoing Russia-Ukraine conflict.

What happened: Oil started the week on a downbeat note with previous talks between Russia and Ukraine having failed.

Oil investors also remained cautious after news of rising covid-19 cases in one of the world major economies.

Why it matters: Another round of talks started between Russia and Ukraine on Monday, raising optimism around a resolution. The recent move came despite Russia’s military forces escalating their attack on Ukraine over the weekend.

The US had imposed a ban on oil imports from Russia and the UK also announced plans to phase out oil from the country by yearend. Russia is the world’s top exporter of crude and oil products combined, shipping around 7% of global supplies.

India said it plans to release more oil from its national stockpiles. However, the country is considering an offer to buy crude and other commodities from Russia at discounted prices.

China, on the other hand, reported a sharp rise in covid-19 cases due to an Omicron outbreak, which resulted in a lockdown in the key Southeastern manufacturing region of Shenzhen.

“Beside new talks between Ukraine and Russia, I guess new lockdowns in China are the reason for a negative start of the week for crude oil,” UBS analyst Giovanni Staunovo said in a note to clients.

WTI crude for April delivery lost $6.32 to close at $103.01 per barrel on the NYMEX, while May Brent crude fell $5.77 to settle at $106.90 per barrel on ICE Futures Europe. US crude prices had surged above $130 per barrel last week, while the global benchmark was trading near the $140 level.

In other energy trading, April natural gas slipped 6 cents to $4.66 per million British thermal units, while April gasoline settled at $3.17 a gallon, down 14 cents on Monday.

What to watch: Traders will keep an eye on announcements from the US Federal Reserve, which is projected to hike interest rates this week. The decision could boost the US dollar, exerting further pressure on oil prices.

Markets will also continue monitoring the covid-19 situation in China, as total global infections surging past 460 million.

The API (American Petroleum Institute) report on crude oil inventories will also remain in focus today. US crude stockpiles had grown by 2.8 million barrels in the week ended March 4.

The markets today

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

 

Context: The CAD/USD pair weakened on Monday, following a sharp decline in oil prices.

Details: The loonie came under pressure as oil, one of Canada’s major exports, declined significantly on Monday. WTI crude prices fell below the major support level of $100 per barrel during the session.

Traders also weighed signs of progress in the talks between Russia and Ukraine and China’s rising covid-19 cases. China imposed tighter restrictions in a bid to prevent the spread of infections in the southern city of Shenzhen, which is expected to heighten global supply chain issues.

The CAD/USD forex pair traded lower by around 0.6% to settle at 1.2826 on Monday. The US dollar index, which tracks the greenback’s performance versus a basket of major peers, fell around 0.2% to 99.

What to watch: The ongoing war between Russia and Ukraine will remain one of the major concerns for markets.

Traders also await economic reports on housing starts and manufacturing sales from Canada today. Canada’s housing starts, which contracted by 3% to 230,800 units in January, are expected to grow to 238,000 in February. Analysts expect manufacturing sales to grow by 1.3% in January, following 0.7% growth in December.

Canada’s consumer price index data, scheduled for release on Wednesday, will also remain in focus, with analysts projecting an acceleration in the annual inflation rate to 5.5% in February, after it hit the highest level since September 1991 in January.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 0.53%, 2.21%, 1.75% and 1.20%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY – 118.27 and 118.41 Positive
AUD/USD – 0.7163 and 0.7180 Positive
USD/CAD – 1.2837 and 1.2857 Positive
WTI Crude Oil – 96.49 and 98.77 Positive
Natural Gas – 4.569 and 4.626 Positive

 

Market snapshot

What else to watch today

Saudi Arabia’s inflation rate and wholesale price inflation rate, UK’s unemployment rate, claimant count change and employment change, France’s inflation rate, Turkey’s central government budget balance, Eurozone’s Industrial production and ZEW indicator of economic sentiment, Germany’s ZEW indicator of economic sentiment and ZEW current conditions, US producer prices, New York Empire state manufacturing index, Redbook index, net long-term TIC flows, net purchases of US treasury bonds and notes and net treasury international capital flows, Australia’s new home sales, South Africa’s SACCI business confidence index, as well as Argentina’s inflation rate.


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