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Crude Oil Jumps on Russia-Ukraine Tensions

The news shaping the markets today

Australia’s new home sales fell by 8.3% from a month ago in January, recording a decline for the first time in six months. However, the AUD/USD pair rose in forex trading this morning.


Japan’s consumer spending grew 2.7% to ¥294,070.4 billion in the fourth quarter, from ¥286,360.8 billion in the previous quarter. The recent reading also surpassed the consensus estimate of a 2.2% increase, lending support to the JPY/USD forex pair.


The People’s Bank of China injected 300 billion yuan with its medium-term lending facility into the country’s financial system. The CNY/USD forex pair rose after the news.


Japan’s economy expanded 5.4% on an annualised basis during the fourth quarter, lower than the market expectations of 5.8% growth, which exerted pressure on the Nikkei 225 index this morning.


New Zealand’s tourist arrivals rose 4.4% year-over-year in December, which sent the NZD/USD pair higher in forex trading this morning.

 

What’s happening: Crude oil recorded gains in another volatile trading session on Monday.

What happened: Oil prices jumped to their highest level in more than seven years during the session on rising tensions between Russia and Ukraine.

However, crude oil prices eased slightly from multi-year highs following comments from Ukrainian Ambassador Vadym Prystaiko.

Why it matters: Russia is one of the world’s biggest producers of oil and gas. The US warned of an imminent invasion by Russia on Ukraine, which raised oil supply concerns and hit risk appetite in the financial markets.

While the US continued its rhetoric of Russia’s attack Moscow denied any invasion plans. The Ukrainian Ambassador Vadym Prystaiko also said the country was looking to make some concessions to Russia. The President of Ukraine also declared February 16 as the “day of unity.” These comments resulted in a significant improvement in investor sentiment and an easing of oil prices.

Meanwhile, the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) nations continued to struggle to meet their monthly oil output targets. The group had earlier announced plans to raise monthly production by 400,000 bpd (barrels per day) until March.

In its latest monthly report, the IEA (International Energy Agency) said that the gap between the OPEC+ target and actual production had increased to 900,000 bpd.

Markets also continued monitoring talks between the US and Iran, which could lead to a possible increase in oil supply.

WTI crude oil gained $2.36, or 2.5%, to close at $95.46 per barrel on Monday, after surging to $95.82, its highest level since September 2014. Brent crude settled at $96.48 per barrel, up 2.2% on Monday, after hitting $96.78, its strongest level since September 2014, earlier in the session.

In other energy trading, wholesale gasoline for March delivery gained 4 cents to $2.78 a gallon, while March natural gas added 26 cents to $4.20 per 1,000 cubic feet on Monday.

What to watch: Traders will keep an eye on developments between Russia and Ukraine as rising tensions could trigger further supply concerns. “If Russia invades Ukraine, crude oil and natural gas prices can be expected to surge significantly. In this case, Brent would probably exceed $100 per barrel,” Commerzbank analyst Carsten Fritsch said in a note to clients.

The release of API’s data on crude oil stockpiles will also remain in focus today. US crude oil inventories had declined by 2.025 million barrels in the week ending February 4, versus a decline of 1.645 million barrels in the prior week.

The markets today

European stocks will be in focus today ahead of a basket of economic reports from the common bloc

 

Context: European equity markets fell sharply for the third session on Monday, with investors continuing to monitor rising tensions in Ukraine.

Details: Several countries have urged their citizens to leave Ukraine due to growing fears of an attack by Russia.

US President Joe Biden’s national security advisor Jake Sullivan warned that an invasion by Russia could begin “any day.” Sullivan added, “We cannot perfectly predict the day, but we have now been saying for some time that we are in the window.” However, Moscow denied any invasion plans.

Earnings reports continued to impact markets in Europe, with companies including Capgemini and BHP releasing their reports before the opening bell on Monday.

The pan-European Stoxx 600 fell 1.83% to close at 460.96 on Monday, with banking stocks being among the worst performers, down more than 3% in the session. All sectors settled in the negative zone on Monday.

London’s FTSE 100 shed 1.69% on Monday, recording the steepest plunge in three weeks. The DAX 40 and CAC 40 lost 2.02% and 2.27%, respectively.

What to watch: Traders await economic reports on balance of trade, employment change and GDP growth rate from the Eurozone today. The Eurozone had recorded a trade deficit of €1.5 billion in November and is expected to report a wider gap of €3.2 billion for December. The number of employed persons in the Eurozone, which grew by 0.9% on quarter to 161.0 million during the three months to September, is projected to rise by just 0.3% in the fourth quarter. Analysts expect the Eurozone’s economy to grow 0.3% on quarter during the final three months of 2022.

Other Markets: US indices closed mostly lower on Monday, with the Dow Jones and S&P 500 down by 0.49% and 0.38%, respectively, and the Nasdaq 100 up by 0.1%.

Support & resistances for today

Technical Levels News Sentiment

USD/JPY – 115.38 and 115.47



Positive


EUR/GBP – 0.8355 and 0.8359


Positive


DAX 40 – 15,051.72 and 15,114.24


Positive


CAC 40 – 6,813.41 and 6,848.86


Positive


WTI Crude Oil – 94.81 and 95.09 Positive

 

Market snapshot

What else to watch today

Saudi Arabia’s inflation rate and wholesale price inflation rate, UK’s claimant count change, unemployment rate, employment change and labour productivity, Spain’s consumer price index, Turkey’s central government budget balance, Indonesia’s total car sales, Eurozone’s ZEW indicator of economic sentiment, Germany’s ZEW economic sentiment index and new car registrations, India’s balance of trade, exports and imports, Canada’s housing starts, US New York Empire State manufacturing index, producer price inflation and Redbook index, Australia’s new home sales, China’s total vehicle sales and foreign direct investment as well as Argentina’s inflation rate.


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