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What’s happening: Crude oil prices settled lower on Thursday, after recording gains in the earlier session.
What happened: Oil prices came under pressure on Thursday as investors assessed the Federal Reserve’s monetary policy outlook following the release of higher-than-expected inflation data by the US.
Investors also monitored rising geopolitical concerns and the monthly report from the OPEC group.
Why it matters: Oil prices were risen by around $20 per barrel since the beginning of this year. Crude was expected to tighten as the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) extended its voluntary output cuts of 2.2 million barrels per day (mbd) into the second quarter. Analysts are projecting a deficit of approximately 1 mbd in the market during the second quarter.
In its latest monthly report, the OPEC maintained its 2024 and 2025 projections for oil demand growth at 2.2 mbd and 1.8 mbd, respectively. The group slashed its outlook for non-OPEC supply growth for 2024 and 2025 from 1.1 mbd to 1 mbd and from 2.3 mbd to 1.3 mbd, respectively.
The Energy Information Administration (EIA) said on Wednesday that crude oil inventories in the US had climbed by 5.841 million barrels in the week ended April 5, higher than market estimates of a gain of 2.366 million barrels. Meanwhile, crude stockpiles at the Cushing, Oklahoma delivery hub fell by 170,000 barrels.
After the US released a hotter-than-expected inflation report for March, speculations have risen of the Federal Reserve delaying its rate cut decision, which could weigh on the energy demand outlook.
Crude oil prices have surged sharply through March and early April. Both WTI and Brent crude adding more than 1% on Wednesday amid growing geopolitical concerns.
WTI crude for May delivery declined by $1.19, or 1.4%, to close at $85.02 per barrel on the NYMEX (New York Mercantile Exchange). June Brent crude, the global benchmark, fell 74 cents, or 0.8%, to settle at $89.74 per barrel on ICE Futures Europe.
In other energy trading, May gasoline fell 0.3% to $2.77 a gallon, while May heating oil declined 1.8% to $2.66 a gallon on Thursday.
Natural gas for May delivery declined by 6.4% to close at $1.76 per million British thermal units, after notching gains over the previous four sessions. Natural gas prices have shed around 30% year-to-date.
What to watch: Investors await the release of the IEA’s (International Energy Agency) monthly oil report today.
Data on Baker Hughes crude oil rigs will also remain in focus today. Crude oil rigs in the US had risen to 508 in the week of April 5, compared to 506 in the prior week.
Context: London stocks settled lower on Thursday as investors assessed the European Central Bank’s monetary policy decision.
Details: The UK is set to release some major economic figures on Friday, which will provide further insights into the Bank of England’s future rate cuts. Traders are currently expecting the Bank of England to cut interest rates by 43 basis points by the end of this year and project the first rate cut in August.
The European Central Bank maintained interest rates at record highs on Thursday, but signalled that it may soon begin reducing rates, as inflation in the Eurozone continues to ease.
UK’s banking and insurance stocks were among the worst performers on Thursday, mirroring the weakness in EU’s financial shares after the ECB’s rate decision. UK’s banks index declined around 2.7% to log its biggest percentage downturn in around two months.
UK’s FTSE 100 fell 0.47% to close at 7,923.80, while the FTSE 250 index slipped 0.08% to settle at 19,786.87 on Thursday.
What to watch: Investors await the release of economic data on GDP growth, goods trade balance, industrial production and balance of trade from the UK today. The British economy, which grew by 0.2% in January, is expected to expand by 0.1% in February.
Analysts expect industrial production to show no growth in February, following a 0.2% decline in January. The UK’s trade deficit is projected to widen further to £3.7 billion in February, from £3.129 billion in January.
Other Markets: US trading indices closed mostly higher on Thursday, with the S&P 500 and Nasdaq 100 up by 0.74% and 1.65%, respectively, and the Dow Jones index down by 0.01%.
Ukraine’s parliament has passed a mobilisation bill to boost its number of soldiers. The news sent the RUB/USD pair lower in forex trading this morning.
Singapore’s economy grew by 2.7% year-over-year in the first quarter, accelerating from the 2.2% growth recorded in the previous period. However, the latest reading came in short of market estimates of 3.0% and exerted pressure on the SGD/USD forex pair.
South Korea’s unemployment rate rose to 2.8% in March, from 2.6% in the previous month, which sent the KRW/USD pair lower in forex trading this morning.
New Zealand’s annual food inflation eased to 0.7% in March, from 2.1% in the previous month, lending support to the NZD/USD forex pair.
Argentina’s central bank slashed the benchmark interest rate by 10 bps to 70% at its latest meeting, sending the ARS/USD pair lower in forex trading this morning.
Germany’s inflation rate, France’s inflation rate, Spain’s inflation rate, Italy’s industry sales, India’s foreign exchange reserves, industrial production and retail inflation, US export prices, import prices and University of Michigan consumer sentiment, China’s New yuan loans, money supply M2, outstanding yuan loans and total social financing, Turkey’s gross foreign exchange reserves, as well as Argentina’s inflation rate.
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