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What’s happening: Crude oil settled lower on Monday, after recording gains for three straight sessions.
What happened: Crude oil pared gains amid supply concerns due to rising geopolitical tensions.
A downturn in China’s property sector also raised energy demand concerns, exerting further pressure on oil prices.
Why it matters: Oil prices surged last week to their strongest level since November 2023, amid US production outages and strong projections of economic growth.
Both WTI and Brent jumped more than $1 per barrel during the Asian trading session on Monday, following the drone attack in Jordan.
However, traders soon turned their focus to China’s property sector, after a Hong Kong court ordered the liquidation of China Evergrande Group. Concerns around China’s struggling real estate sector is expected to impact crude demand from the world’s largest oil importer.
Markets also remained on the sidelines after European Central Bank policymakers were unable to reach a consensus around the timing of rate cuts.
Meanwhile, Russia is expected to reduce the naphtha exports by around a third after fires disrupted operations at the Baltic and Black Sea refineries.
Strength in the US dollar also exerted some pressure on crude oil prices. Appreciation in the US dollar makes commodities priced in the greenback more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.2% to 103.61 during Monday’s session.
WTI crude for March delivery declined $1.23, or around 1.6%, to close at $76.78 per barrel on the NYMEX (New York Mercantile Exchange), after recording gains in the previous three trading sessions. March Brent crude, the global benchmark, fell $1.15 to close at $82.40 per barrel on ICE Futures Europe.
In other energy trading, February gasoline lost 6 cents to reach $2.23 a gallon, while February heating oil declined 1 cent to $2.83 a gallon and natural gas for February delivery dipped 22 cents to $2.49 per million British thermal units on Monday.
What to watch: Investors will focus on the OPEC+ (Organization of the Petroleum Exporting Countries and allies), as leading ministers from the group are expected to meet online on February 1. The OPEC+ is likely to announce its decision on oil output for April and beyond in the coming weeks.
The API’s (American Petroleum Institute) data on crude oil stockpiles will be released on Tuesday, while the EIA’s report on inventories is scheduled to be announced on Wednesday. US crude oil stockpiles had contracted by 6.674 million barrels in the week ended January 19, following a rise of 0.483 million barrels in the prior week.
Context: The EUR/USD forex pair moved lower on Monday, as investors assessed the latest comments from European Central Bank officials.
Details: The European Central Bank had kept interest rates on hold last week, for the third consecutive meeting.
There were opposing comments from ECB members. One of the central bank’s policymakers Peter Kazimir wrote in a blog post, “The next move will be a cut, and it is within our reach.” Meanwhile, Klas Knot, President of De Nederlandsche Bank, said, “We now have a credible prospect that inflation will return to 2% in 2025. The only piece that’s missing is the conviction that wage growth will adapt to that lower inflation.”
Strength in the US dollar also weighed on the euro on Monday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, added 0.2% to 103.61 during Monday’s session.
The European common currency also extended its losses on Monday, ahead of the US Federal Reserve’s interest rate decision later this week.
The EUR/USD pair fell to 1.0834 on Monday. The STOXX Europe 600 Index gained 0.21% to close at 484.84. The EUR/GBP forex pair fell more than 0.2% to 0.8525.
What to watch: Investors await the release of economic reports on GDP growth rate, economic sentiment indicator and consumer confidence indicator from the Eurozone today. The Eurozone economy, which shrank by 0.1% in the third quarter, is expected to contract again by 0.1% in the fourth quarter.
Analysts expect the Eurozone’s economic sentiment indicator to decline to 96.2 in January, from 96.4 in December, while the consumer confidence indicator is projected to decline by 1 point from the prior month to a reading of -16.1 in January.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.59%, 0.76% and 1.01%, respectively.
Hungary is open to compromise on a proposed European Union aid package worth €50 billion ($54 billion) for Ukraine. The news sent the safe-haven US dollar index slightly lower this morning.
The Philippines said producer prices had risen 0.6% year-over-year in December, after a 0.2% rise in the prior month. This being the highest reading since August 2023 exerted pressure on the PHP/USD forex pair.
Australia’s retail sales fell by 2.7% in December, worse than market expectations of a 1.0% decline, which sent the AUD/USD pair lower in forex trading this morning.
Japan’s unemployment rate declined to 2.4% in December, from 2.5% in the prior two months, lending support to the JPY/USD forex pair.
Thailand’s car sales contracted by 17.48% year-over-year to 68,236 units in December, compared to a 9.76% decline a month ago. Despite this, the THB/USD pair rose in forex trading this morning.
Saudi Arabia’s balance of trade, value of loans and money supply M3, South Africa’s money supply M3, private sector credit and government budget value, France’s GDP growth rate, household spending, Turkey’s economic confidence index, Spain’s GDP growth rate, consumer price index and industry confidence indicator, Germany’s GDP growth rate, Italy’s GDP growth rate and producer price inflation, UK’s consumer credit, net approvals for house purchases, mortgage lending, money supply M4 and net lending to individuals, Eurozone’s consumer inflation expectations index, industry confidence indicator, selling price expectations, services sentiment, brazil IGP-M inflation and central bank of brazil focus market readout, Mexico’s GDP growth rate, US Redbook index, S&P CoreLogic Case-Shiller home price index, FHFA house price index, number of job openings, number of job quits, CB consumer confidence and Dallas Fed general business activity index.
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