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Crude oil gains on tight supply

Tuesday, October 10, 2023

Today’s headlines

What’s happening: Oil prices gained more than 4% on Monday, as the world assessed the impact of ongoing geopolitical tensions.

What happened: Crude prices had declined sharply last week amid concerns around weakening demand due to a slowdown in global economic growth.

Oil prices spiked on the first trading day of the week on tightening supply and rising geopolitical conflict.

Why it matters: WTI crude oil prices tanked around 9% last week amid prospects of weakness in demand. Data released from the EIA (Energy Information Administration) last week showed that US gasoline stockpiles had increased the most since the first week of 2022. Higher interest rates and easing global economic growth weighed on the overall demand outlook for crude.

Meanwhile, some progress was made in the US-Venezuela talks, which could provide some relief in sanctions to Caracas and allow at least one more foreign oil company to purchase Venezuelan crude oil.

Brent crude for December delivery gained $3.57 to reach $88.15 per barrel on Monday, after closing at $84.58 last week. Despite the gains on Monday, the global benchmark is still trading significantly lower than the one-year high of $97.69 per barrel recorded on September 28.

WTI crude oil for November delivery climbed $3.59 to $86.38 on Monday.

In other energy trading, wholesale gasoline for November delivery gained 5 cents to $2.24 a gallon, while November heating oil rose 7 cents to $2.97 a gallon and November natural gas added 4 cents to reach $3.38 per 1,000 cubic feet.

What to watch:

The release of EIA’s data on crude oil stockpiles, due for Thursday, will also remain in focus. Crude oil inventories in the US, which declined by 2.224 million barrels in the week ending September 29, is projected to increase by 1.3 million barrels in the latest week.

The markets today

UK stocks will be in focus today ahead of a week of important data releases

Context: London’s FTSE 100 closed almost flat on Monday, outpacing its peers in the European region.

Details: The UK stock market ended a turbulent week with some gains on Friday. The session on Monday proved to be equally volatile, with investors concerned about rising geopolitical tensions.

The rise in crude prices following the attack sent UK’s energy sector higher by around 2.5% on Monday. Aerospace and defence shares gained close to 2%, while banking stocks moved lower, exerting some pressure on the stock indices.

Shares of defence contractor BAE Systems spiked, while oil giants BP and Shell also gained significantly on Monday. However, Croda International’s shares plummeted more than 7% after the group slashed its annual profit outlook amid weakening demand. IAG’s stock also lost around 6% following the suspension of flights to Israel and a spike in jet fuel prices.

The benchmark FTSE 100 slipped 0.03% to settle at 7,492.21, while the midcap FTSE 250 index declined 0.9% to 17,572.06 on Monday. The STOXX Europe 600 Index fell 0.26% to close at 443.79.

What to watch: With no major data scheduled for today, investors await the release of economic reports on GDP growth rate, industrial production, and balance of trade from the UK on Thursday.

The British economy, which contracted by 0.5% in July, is expected to expand by 0.1% in August. Analysts expect industrial production to decline by 0.2% in August, following a 0.7% decline in July. The UK’s trade deficit, which shrank to £3.446 billion in July, is projected to rise to £3.6 billion in August.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.59%, 0.63% and 0.49%, respectively.

The news shaping the markets

Ukrainian President Volodymyr Zelenskiy is scheduled to visit Romania today, marking his first trip to a NATO member nation since Russia’s invasion. The news sent the safe-haven US dollar index slightly lower this morning.


The Philippines said its trade deficit had narrowed to $4.13 billion in August, from $6.03 billion in the year-ago month, lending support to the PHP/USD forex pair.


Japan’s current account surplus shrank to ¥2.280 trillion in August, from ¥2.772 trillion in the prior month, which sent the JPY/USD pair lower in forex trading this morning.


Australia’s Westpac-Melbourne Institute Consumer Sentiment index increased 2.9% to 82 in October, from 79.7 a month ago, and lent support to the AUD/USD forex pair.


UK’s retail sales grew by 2.8% year-over-year in September, after a 4.3% increase in August, which sent the GBP/USD pair higher in forex trading this morning.

What else to watch today

Saudi Arabia’s industrial production, Turkey’s industrial production, unemployment rate and labour force participation rate, Italy’s industrial production, US NFIB small business optimism index, Redbook index, wholesale inventories and consumer inflation expectations, as well as Russia’s current account.


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