Crude oil records weekly loss amid demand concerns

Today’s headlines

What’s happening: Crude oil prices settled lower on Friday, as investors assessed supply and demand dynamics.

What happened: Oil prices closed at their weakest level in over two months amid expectations of surplus supply next year.

Concerns over demand from China, the world’s largest crude importer, and strength in the US dollar also weighed on oil prices last week.

Why it matters: Donald Trump’s win in the US Presidential election has increased uncertainties around the potential impact of his policies, which could result in higher domestic oil production and imposing tighter sanctions on Iran.

Although the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) continues are expected to extend their output cuts, the IEA (International Energy Agency) said in a report that supply is likely to surpass demand by 1 million barrels in 2025.

Weakness in China’s economy also stroked concerns around oil demand. Government data released last week showed refinery throughput had declined by 4.6% year-over-year in October.

Strength in the US dollar also exerted pressure on oil prices last week as a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose to its highest level in a year last week.

WTI crude for December delivery dipped $1.68, or around 2.5%, to close at $67.02 per barrel on the NYMEX (New York Mercantile Exchange), settling at their lowest level since September 10.

January Brent crude, the global benchmark, tumbled $1.52, or 2.1%, to $71.04 per barrel on ICE Futures Europe on Friday, closing at its weakest level since September 11. For the week, Brent fell 3.8% and WTI crude traded lower by 4.8%.

In other energy trading, December gasoline declined 1.6% to $1.9493 a gallon, recording a weekly loss of 3.1%. December heating oil fell 1.9% to $2.1709 a gallon, down 3% last week. Natural gas for December delivery bucked the trend and added 1.4% to $2.823 per million British thermal units, recording a weekly gain of 5.8%.

What to watch: Investors will continue monitoring the overall economic environment, trajectory of the US dollar and updates from Donald Trump and his cabinet around policies to be implemented when he enters the White House in January next year.

The markets today

Ecommerce giant Alibaba in focus today after releasing quarterly results

Context: Shares of Alibaba Group Holding Limited fell on Friday after the company reported mixed results for the second quarter.

Details: Continued concerns around the state of the economy impacted consumer spending in China, weighing on Alibaba’s domestic business. Consumers in China have been cautious, mainly on consumer discretionary spending, as the world’s second largest economy has been struggling to emerge from the ongoing property crisis.

Alibaba and arch-rival JD.com introduced promotions and steep discounts to trigger sales, which impacted their top- and bottom-lines. JD.com also reported downbeat quarterly revenues last week.

Alibaba’s revenues grew by 5% year-over-year to 236.50 billion yuan in the second quarter, missing consensus estimates of 240.17 billion yuan. Despite this miss, the company’s adjusted profits came in at 15.06 yuan per share, topping Wall Street expectations of 14.88 yuan per share.

Revenue from the company’s Cloud Intelligence segment rose 7% to 29.61 billion yuan, while revenue from its international ecommerce business climbed 29% to 31.67 billion yuan, driven by rising demand for lower-priced goods around the world.

“Growth in our Cloud business accelerated from prior quarters, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth,” CEO Eddie Wu said.

How shares responded: The US-listed shares of Alibaba fell 2.2% to close at $88.59 on Friday. The stock has shed around 13% over the past month.

What to watch: Investors will continue monitoring the economic environment in China. Moves by JD.com to attract more traffic and rising competition from low-price retailers like Pinduoduo and Douyin will also remain in focus.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.09%, 0.27%, 0.58% and 0.77%, respectively.

The news shaping the markets

Ukrainian President Volodymyr Zelensky said the ongoing war with Russia will end “faster” under the Trump administration. The news sent the RUB/USD pair higher in forex trading this morning.

New Zealand’s BusinessNZ performance of services index rose by 0.3 points to a reading of 46.0 in October, lending support to the NZD/USD forex pair.

China’s foreign direct investment contracted by 29.8% year-over-year to 693.21 billion yuan during the first 10 months of the year, which sent the CNY/USD pair lower in forex trading this morning.

Japan’s core machinery orders fell by 0.7% to ¥ 852 billion in September. This being the third consecutive month of decline and coming in lower than market expectations of a 1.9% rise exerted pressure on the JPY/USD forex pair.

Peru’s GDP grew by 3.16% year-over-year in September. This marked a deceleration from the 3.53% growth recorded in the previous month, which sent the PEN/USD pair lower in forex trading this morning.

What else to watch today

Spain’s balance of trade, Eurozone’s balance of trade, Canada’s housing starts and foreign investment in securities, US NAHB/Wells Fargo housing market index, net long-term TIC flows, net purchases of US treasury bonds and notes, and net treasury international capital flows, as well as Central Bank of Brazil’s focus market readout.