Crude oil declines on easing supply concerns

Today’s headlines

What’s happening: Crude oil prices fell this morning amid progress in talks between the US and Iran.

What happened: Qatar said both regions had made “positive” progress in their negotiations, which concluded on Wednesday.

A rise in crude shipments through the Strait of Hormuz also weighing on oil prices this morning.

Why it matters: The US and Iran discussed shipment traffic through the Strait of Hormuz in Doha. Although Vice President JD Vance said that oil ⁠flows through the Strait had returned to pre-conflict levels, there has only been a partial resumption in traffic, with Iran and the US exchanging fire last weekend after a cargo vessel was attacked.

Iran repeatedly announced plans to impose tolls on shipping from mid-August, following the expiration of the toll-free period.

Oil exports from the UAE have returned to the pre-conflict levels, while Iran’s oil exports surged above 40 million barrels following the lifting of the US blockade.

The easing of supply shortage concerns was followed by rising speculations of oversupply by the yearend.

Meanwhile, data released on Wednesday showed crude inventories in the US declined by 3.775 million barrels to 408.3 million barrels last ⁠week. This was the lowest reading since September 2018, according to the EIA (Energy Information Administration). However, the latest decline was smaller than market estimates of 4.5 million barrels.

Gasoline stockpiles fell 2.333 million barrels to 214 million barrels, compared to market expectations of a decline of 0.95 million barrels, while distillate inventories surged by 2.483 million barrels to 108.6 million barrels, versus market estimates of a decline of 0.7 million barrels. Meanwhile, net US crude imports jumped 370,000 barrels per day (bpd) during the period.

Oil prices declined despite weakness in the US dollar. A softer greenback typically makes commodities cheaper for foreign currency holders and boosts demand. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 101.36 this morning.

Spot price for WTI crude oil fell 0.4% to $68.36 per barrel this morning, while Brent crude price lost 0.2% to reach $71.27 per barrel.

In other energy trading, gasoline fell 0.7% to $2.9239, while natural gas declined 0.7% to $3.198 and heating oil prices slipped 0.3% to $3.2099.

What to watch: Investors will keep an eye on further developments in the negotiations between the US and Iran, with Qatar saying the next round of talks is expected to take place soon.

Data on the EIA’s natural gas stockpile change (1830 UAE Time) will be released today. US natural gas stocks, which surged 76 billion cubic feet in the week ending June 19, are expected to rise by 81 billion cubic feet in the latest week.

The markets today

The euro in focus today ahead of unemployment data

Context: The euro gained versus the US dollar this morning as investors digested the latest economic reports.

Details: Data released on Wednesday showed Eurozone’s consumer price inflation rate decelerated to 2.8% in June from 3.2% in the previous month. The figure also came in better than market estimates of 3.0%.

The latest reading was the lowest since February, before the US-Iran conflict impacted energy supplies and sent crude oil prices higher. However, inflation remained above the European Central Bank’s 2.0% target.

The Eurozone’s S&P Global manufacturing PMI fell to 51.4 in June from 51.6 in the previous month. The figure came in slightly higher than the preliminary reading of 51.3 and showed manufacturing activity remaining in the expansion zone for the fifth straight month.

Weakness in the US dollar also lent support to the euro. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 101.36 this morning.

The EUR/USD forex pair gained around 0.1% to 1.1386 this morning, while the EUR/GBP pair slipped to 0.8568.

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

Data on Eurozone’s unemployment rate (1300 UAE Time) will be released today. Analysts expect the unemployment rate to remain unchanged from the previous month at 6.3% in May.

Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.03%, 0.22% and 1.54%, respectively.

The news shaping the markets

Russia launched ballistic missile and drone attacks on Kyiv through last night. The news sent the USD/RUB pair lower in forex trading this morning.

South Korea’s annual inflation rate accelerated to 3.2% in June, from 3.1% in the previous month. Inflation rising at the fastest pace since December 2023 lent support to the USD/KRW forex pair.

Mexico’s S&P Global manufacturing PMI surged to 51.3 in June from 49.6 in the previous month. Manufacturing activity surging to the strongest level since March 2024 sent the USD/MXN pair lower in forex trading this morning.

Chile’s IMACEC economic activity index declined 0.9% year-over-year in May, recording the fifth straight month of contraction. However, the latest decline being lower than the previous month’s 1.2% plunge exerted pressure on the USD/CLP forex pair.

Australia recorded a trade deficit of A$3.02 billion in May, versus a A$1.38 billion surplus in the previous month. Despite the figure coming in far worse than market estimates of a surplus of A$2.2 billion, the AUD/USD pair rose in forex trading this morning.

What else to watch today

Brazil’s IPC-Fipe inflation (1200 UAE Time), Italy’s unemployment rate (1200 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), US nonfarm payrolls (1630 UAE Time), unemployment rate (1630 UAE Time), average hourly earnings (1630 UAE Time), initial jobless claims (1630 UAE Time), continuing jobless claims (1630 UAE Time), factory orders (1800 UAE Time), Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time), Singapore’s SIPMM manufacturing PMI (1700 UAE Time) as well as Canada’s S&P Global manufacturing PMI (1730 UAE Time).