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Crude oil dips on Friday, but records weekly gain

 

Monday, November 27, 2023

Today’s headlines

What’s happening: Crude oil settled lower on Friday, after some easing in geopolitical unrest.

What happened: Expectations of the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) continuing to cap crude production next year lent support to oil prices last week.

Crude oil notched its first weekly gain in five weeks, despite declining on Friday.

Why it matters: Last week, the OPEC+ group surprised markets by announcing a delay in its meeting due to disagreements over output quotas, which resulted in WTI oil prices declining as much as 5% on Wednesday.

The OPEC+ has now scheduled a virtual meeting on November 30 to decide on upcoming crude output for its members.

Both WTI and Brent crude recorded their first weekly gain in five weeks ahead of the OPEC+ group’s decision. However, after spiking to around $98 per barrel in September, oil prices are on course to recording the second consecutive month of decline amid a tight crude market in the last quarter of the year.

The release of the first group of hostages in Gaza lowered geopolitical risk premium. Oil prices also received support from the Chinese authorities called on banks to provide support to the country’s struggling property sector. However, a rise in US crude stockpiles limited the gains for oil.

Brent crude futures fell 84 cents, or 1%, to close at $80.58 per barrel on Friday, while WTI crude oil declined $1.56, or 2%, to settle at $75.54 per barrel.

In other energy trading, December gasoline declined 3% to settle at $2.165 a gallon, while December heating oil fell 1.9% to close at $2.836 a gallon and December natural declined by 1.5% to $2855 per million British thermal units on Friday.

What to watch: Investors will watch the OPEC+ group’s meeting this week. The release of the API’s (American Petroleum Institute) data on crude oil stockpiles, due for release on Tuesday, will also remain in focus. US crude oil stockpiles had risen by 9.047 million barrels in the week ended November 17, after an increase of 1.335 million barrels in the prior week.

The markets today

US stocks will be in focus today ahead of various economic reports

Context: Wall Street stocks closed mixed on Friday as investors assessed PMI data and awaited more details on the Black Friday performance of retailers.

Details: Data released on Friday showed the S&P Global US composite PMI coming in at 50.7 in November, unchanged from the three-month high recorded in October. The signalled continued growth, albeit slow, in the country’s private sector activity.

Manufacturing PMI declined to 49.4 in November, from 50 a month ago. The figure missed market estimates of 49.8. Meanwhile, services PMI climbed to 50.8 in November, from 50.6 in the previous month, notching the highest reading in four months.

Shares of major retail shares closed slightly higher on Friday, with Black Friday kicking off the key holiday shopping season. A report by Mastercard SpendingPulse suggested that Black Friday sales (excluding automobiles) had risen by more than 2.5% year-over-year. According to Adobe Analytics, Black Friday 2023 online sales researched a record $9.8 billion, up 7.5% year-over-year.

Shares of top US retailers, including Amazon, Walmart, Home Depot, Costco, Target, Lowe’s Company, and Target, edged higher in Friday’s session.

The Dow Jones index rose by 117.12 points, or 0.33%, to close at 35,390.15, recording gains for the fourth week in a row. The S&P 500 added 0.06% to 4,559.34, while the Nasdaq 100 fell 0.12% to close at 15,982.01 on Friday. For the week, the Dow added 1.27%, while the S&P 500 gained 1%.

What to watch: Investors await the release of economic data on new home sales and Dallas Fed manufacturing index from the US today. Sales of new single-family houses in the US, which rose by 12.3% to an annualised rate of 759,000 in September, is projected to decline by 4% in October. Analysts expect the Dallas Fed manufacturing index to improve to -17 in November, from -19.2 in October.

Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.06%, 0.22%, 0.20% and 0.33%, respectively.

The news shaping the markets

Russia launched its biggest drone attack on Kyiv since announcing its full-scale invasion of Ukraine. The news sent the safe-haven US dollar index higher this morning.


Taiwan’s consumer confidence index rose to 69.40 in November, from 69.06 in the prior month. This being the highest reading since April 2022 lent support to the TWD/USD forex pair.


China’s industrial profits fell by 7.8% year-over-year to 6,115.42 billion yuan during the first ten months of the year, sending the CNY/USD pair lower in forex trading this morning.


Canada’s manufacturing sales declined by 2.7% in October, versus a 0.4% increase in September, which exerted pressure on the CAD/USD forex pair.


Mexico’s economic activity expanded by 3.3% year-over-year in September. This, however, represented a slowdown from the 3.7% growth recorded in the prior month and sent the MXN/USD pair lower in forex trading this morning.

What else to watch today

France’s initial jobless claims and unemployed persons, UK’s CBI distributive trades, Brazil’s current account, foreign direct investment and Central Bank of Brazil focus market readout, Mexico’s balance of trade, as well as US building permits.


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