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Trends & Analysis
News

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News

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News

Goldman Sachs shares surge after earnings beat

News

Keep an eye on these key S&P 500 levels

News

US big banks report better-than-expected earnings

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Crude oil falls as markets assess OPEC+ decision

 

Monday, December 04, 2023

Today’s headlines

What’s happening: Crude oil settled lower on Friday, recording losses for the second consecutive session.

What happened: Investors remained unconvinced about the depth of voluntary production cuts announced by the OPEC+ (Organisation of Petroleum Exporting Countries and its allies).

Weak manufacturing data from around the world also impacted the overall market sentiment, sending oil prices lower for the week.

Why it matters: Crude prices recorded losses for a second straight session on Friday after the OPEC+ announced plans to reduce crude output by 2.2 million bpd (barrels per day) during the first quarter of 2024. This includes an extension of the 1 million bpd voluntary output cut by Saudi Arabia.

The voluntary cuts would be brought down gradually depending on market conditions, the OPEC+ said. The group pumps over 40% of the world’s oil.

Brazil also announced plans to join OPEC+ in January next year, with Brazil targeting 5.4 million bpd of output by the end of the decade, compared to its existing output of about 2 million bpd.

Investors also continued monitoring geopolitical unrest, which has been impacting oil prices this year.

The US ISM manufacturing PMI came in flat at 46.7 for November, compared to the consensus estimates of 47.6. The HCOB Eurozone manufacturing PMI rose to 44.2 for November, from 43.1 a month ago, but remained in the contraction zone.

The US announced its intentions of imposing further sanctions on oil from Russia. The Baker Hughes said on Friday that US oil rigs had risen by 5 to 505 last week.

WTI crude for January delivery fell by $1.89, or 2.5%, to close at $74.07 a barrel on the NYMEX (New York Mercantile Exchange) on Friday. The benchmark oil futures ended the week down around 2%. February Brent crude declined by $1.98, or 2.5%, to settle at $78.88 per barrel on ICE Futures Europe on Friday and also lost 2% last week. Prices for both crude standards closed at their weakest level since November 16.

In other energy trading, January gasoline declined by 2.5% to $2.12 a gallon, falling 0.7% last week, while January heating oil lost 3.4% at $2.66 a gallon, recording a loss of around 3.7% for the week. Natural gas for January delivery rose by a penny to $2.81 per million British thermal units but still closed the week down by 6.2%.

What to watch: Investors will continue monitoring the geopolitical situation, which is expected to significantly impact oil prices ahead. The API’s (American Petroleum Institute) data on crude oil stockpiles, due to be released on Tuesday, will also remain in focus. US crude stockpiles had contracted by 0.817 million barrels in the week ended November 24, after an increase of 9.047 million barrels in the earlier week.

The markets today

US stocks will be in focus today ahead of factory orders data

Context: US stocks closed higher on Friday, with the S&P 500 index settling at its strongest level so far this year.

Details: Wall Street stocks recovered in November after recording losses for three straight months, amid strong earnings reports, a slowdown in inflation level and blockbuster BFCM (Black Friday Cyber Monday) sales. The S&P 500 gained 0.77%, while the Dow Jones index climbed 2.4% last month.

With easing inflation in the US, investors are more optimistic about the Federal Reserve being done with its monetary tightening policy and expect policymakers to start reducing interest rates from next year.

Federal Reserve Chief Jerome Powell said on Friday that interest rate hikes had resulted in a slowdown in the economy and that policymakers would need to move carefully with rates.

Shares of UiPath jumped around 27% on Friday, after the company reported better-than-expected third-quarter results. Ulta Beauty’s shares added more than 10%, after the company reported upbeat quarterly sales and raised its guidance for the full year.

The S&P 500 rose 26.83 points, or 0.59%, to close at 4,594.63 points on Friday, compared to the previous high this year of 4,588.96, recorded on July 31.

The Dow Jones index climbed to another fresh high of 2023 by adding 294.60 points, or 0.82%, to settle at 36,245.50. The blue-chip index has gained nearly 9.4% so far this year. The Nasdaq 100 rose 0.31% to close at 15,997.58.

What to watch: Investors await the release of data on factory orders from the US today. New orders for manufactured goods, which rose by 2.8% to $601.5 in September, is expected to decline by 2.3% in October.

Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC40 and STOXX Europe 600 Index up by 1.01%, 1.12%, 0.48% and 0.99%, respectively.

The news shaping the markets

Russian President Vladimir Putin signed a decree to increase troops by 15%. The news sent the safe-haven US dollar index slightly higher this morning.


Australia’s business inventories grew by 1.2% during the third quarter of 2023. This was better than the market estimates of a 0.6% decline and lent support to the AUD/USD forex pair.


Colombia’s Davivienda manufacturing PMI rose to 49.4 in November, from 48.1 in the previous month. This was, however, the seventh month of contraction and sent the COP/USD pair lower in forex trading this morning.


Canada’s unemployment rate increased to 5.8% in November, from 5.7% in the prior month, exerting pressure on the CAD/USD forex pair.


Brazil’s S&P Global manufacturing PMI improved to 49.4 in November, from 48.6 in the previous month. This softer contraction in factory activity sent the BRL/USD pair slightly higher in forex trading this morning.

What else to watch today

Germany’s balance of trade and new passenger car registrations, Türkiye’s inflation rate, total vehicle sales and producer price inflation, Brazil’s IPC-Fipe inflation, foreign direct investment, current account and Central Bank of Brazil focus market readout, Spain’s unemployment change and number of foreign tourist arrivals, as well as Mexico’s gross fixed investment.


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