Crude oil moves higher, records weekly gain

The news shaping the markets today

White House national security adviser Jake Sullivan said any lethal aid from China to help Russia in its invasion of Ukraine would come at real costs. The safe-haven US dollar index fell slightly this morning.

Australia’s business inventories contracted by 0.2% in the fourth quarter, following 1.7% growth in the third quarter, which exerted pressure on the AUD/USD forex pair.

New Zealand’s retail sales declined by 0.6% in the final three months of 2022, versus 0.6% growth in the prior period, sending the NZD/USD pair lower in forex trading this morning.

Canada posted a budget deficit of C$1.98 billion in December, versus a C$3.58 billion surplus in the year-ago month, which exerted pressure on the CAD/USD forex pair.

Mexico’s current account surplus widened to $4,576 million in the fourth quarter, from $1,137 million in the year-ago quarter. The country’s current account deficit widened to $13,423 million in 2022, from $8,209 million in the previous year, sending the MXN/USD pair lower in forex trading this morning.

What’s happening: Crude oil futures recorded gains on Friday, after additional sanctions were imposed on Russia.

What happened: Oil prices found support from production cuts announced by Russia.

However, WTI oil prices remained significantly lower than the levels reached ahead of Russia’s invasion of Ukraine.

Why it matters: Crude oil prices had been under pressure with supply from Russia continuing into the market. However, the country announced plans to reduce oil production by 500,000 bpd (barrels per day) in March, following further sanctions and price caps announced by several nations.

Two companies in Russia also announced plans to reduce their exports in March, amid lower prices.

US crude inventories continued to increase, gaining 7.6 million barrels in the previous week, according to the EIA’s (Energy Information Administration) data released last Thursday.

Some improvements in the PMI (Purchasing Managers’ Index) for manufacturing activity in the US and China provided further support to oil prices. The S&P Global manufacturing PMI for the US rose to 47.8 in February, from the previous month’s reading of 46.9.

WTI for April delivery gained 93 cents, or 1.2%, to close at $76.32 per barrel on the NYMEX on Friday, after snapping a seven-session losing streak on Thursday. Crude prices added around 0.3% last week but are still around 17% below the levels recorded ahead of the Russia-Ukraine conflict.

April Brent crude prices climbed 95 cents, or 1.2%, to settle at $83.16 per barrel on ICE Futures Europe, gaining around 0.2% last week.

In other energy trading, gasoline for March declined 0.9% to $2.359 a gallon, with March heating oil adding 3.3% to $2.796 a gallon on Friday. Natural gas for March climbed 5.9% to $2.451 per million British thermal units, jumping around 7.7% during the week.

What to watch: Investors will keep an eye on developments surrounding Russia’s production cuts and any signs of increased demand from China.

Data on crude oil stockpiles from the American Petroleum Institute and EIA, due on Tuesday and Wednesday, respectively, will also remain in focus.

The markets today

Bitcoin will be in focus today after closing lower last week

Context: Bitcoin recorded losses last week amid concerns around inflation and interest rate hikes by major central banks.

Details: Cryptocurrency prices maintained a downtrend last week, with investor risk appetite being hurt by concerns around inflation and central banks continuing their aggressive monetary policy. Both Bitcoin and Ethereum lost around 6% last week.

The world’s two largest cryptocurrencies by market valuation fell on Friday, after the US Commerce Department released the report on personal consumption expenditures price index. The PCE price index, which is the Federal Reserve’s preferred inflation gauge, surprisingly rose by around 5.4% in January.

Although inflation in the US has moderated in recent months, Fed officials have maintained a hawkish stance.

Bitcoin fell to around $23,000 at one point on Friday. Despite the decline last week, the crypto has gained around 39% year to date, signalling investor confidence in the global economic environment compared to 2022.

Tezos was among the top performing cryptocurrencies, gaining approximately 8% last week. Token of the Optimism network jumped around 20% last week, after Coinbase Global announced plans to launch its new layer 2 network using Optimism technology.

What are expectations: Traders will keep an eye on comments from Fed officials. Markets will also monitor inflation levels in the country.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 index down by 0.37%, 1.72%, 1.78% and 1.04%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s economic confidence index and balance of trade, Eurozone’s loans to non-financial corporations, money supply M3, loans to households, economic sentiment indicator, consumer confidence’s inflation expectations index, selling price expectations, consumer confidence indicator, services confidence indicator and industry confidence indicator, France’s initial jobless claims and number of unemployed persons, Italy’s business confidence, Brazil’s IGP-M inflation, value of loans and Central Bank of Brazil focus market readout, Mexico’s balance of trade, Spain’s industry confidence indicator, Canada’s current account, US durable goods orders, Dallas Fed manufacturing index and pending home sales, Australia’s house prices, as well as Argentina’s retail sales.