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Crude oil rises on extension of production cuts

Tuesday, November 07, 2023

Today’s headlines

What’s happening: Crude oil moved higher on Monday, after recording losses in the previous session.

What happened: Saudi Arabia and Russia confirmed their plans to extend production cuts, providing a boost to oil prices.

Investors continued to assess ongoing geopolitical unrest, which could impact crude supplies.

Why it matters: Crude oil prices fell sharply last week amid some easing of geopolitical concerns.

WTI crude oil prices fell 5.9% last week, recording the weakest level in two months, while Brent crude lost 4.8% in the week. Both grades of crude recorded their second straight weekly decline.

On Sunday, Saudi Arabia confirmed plans to extend production cuts by 1 million barrels per day until the end of the year. Going ahead with this, the kingdom’s production would be around 9 million bpd in December.

Russia also said it would extend its additional voluntary production cut of 300,000 bpd through the end of December.

Investors continued monitoring the macroeconomic situation in Europe. The HCOB Eurozone composite PMI fell to 46.5 in October, from 47.2 in September. This marked continued contraction in the region but was also the lowest reading since November 2020. Eurozone services PMI came in at 47.8 for October, the steepest contraction since February 2021.

WTI crude for December delivery gained 31 cents to close at $80.82 per barrel on the NYMEX (New York Mercantile Exchange) on Monday, while January Brent crude added 29 cents to reach $85.18 per barrel on ICE Futures Europe.

In other energy trading, December gasoline gained 4 cents to $2.24 a gallon, while December heating oil added 3 cents to $2.95 a gallon and natural gas for December delivery fell 26 cents to $3.26 per million British thermal, after notching a 0.9% gain last week.

What to watch: Investors will watch economic reports from China following the downbeat factory orders data for October released last week.

The API’s (American Petroleum Institute) data on crude oil stockpiles will also remain in focus today. US crude oil inventories rose by 1.347 million barrels in the week ended October 27, following a decline of 2.668 million barrels in the prior week.

The markets today

European stocks will be in focus today ahead of a couple of major economic reports

Context: European markets closed mostly lower on Monday, as investors digested key economic reports.

Details: The benchmark European index had recorded its biggest weekly surge since March last week, following strong earnings reports and prospects of an end to rate hikes by major global central banks.

Data released on Monday showed that the downturn in business activity in the Eurozone had accelerated in October, with composite PMI came at the lowest reading since November 2020.

The HCOB Germany composite PMI came in at 45.9 in October, signalling a contraction for the fourth month in a row. Meanwhile, France’s composite PMI declined to 44.6 in October, versus a flash reading of 45.3, signalling a contraction in the private sector for the fifth straight month in the eurozone’s second-largest economy.

Ryanair’s shares gained more than 5% on Monday, after Europe’s largest airline by passenger numbers reported results for the six months and projected record profits for the year. Shares of PostNL fell around 13% after the company reported downbeat third-quarter results. Teleperformance’s stock lost around 3%, after the call-centre operator lowered its revenue growth forecast for the year.

The STOXX Europe 600 Index fell 0.16% to close at 443.52 on Monday, after adding more than 3% last week.

Oil and gas stocks were among the top performers, gaining around 0.8% in Monday’s session. Real estate stocks fell around 2.9%, after recording sharp gains last week.

London’s FTSE 100 rose 0.03 points to close at 7,417.76 on Monday, while Germany’s DAX 40 and France’s CAC 40 lost 0.35% and 0.48%, respectively.

What to watch: Investors await the release of economic data on construction PMI and producer prices from Eurozone today. The HCOB Eurozone construction PMI is expected to rise to 44.4 in October, from 43.6 in September. Analysts expect producer prices in the Eurozone to rise by 0.4% in September, following a 0.6% increase in August.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.10%, 0.18% and 0.37%, respectively.

The news shaping the markets

Ukraine’s President Volodymyr Zelenskyy said any talks of elections were “not appropriate” amid the ongoing war. The news sent the safe-haven US dollar index higher this morning.


The Philippines said food prices rose by 7.0% year-over-year in October, after a 9.7% increase a month ago, which exerted pressure on the PHP/USD forex pair.


UK’s retail sales grew by 2.6% year-over-year in October. This marked a slowdown from the 2.8% growth recorded in the previous month and sent the GBP/USD pair lower in forex trading this morning.


Japan’s household spending fell by 2.8% year-over-year in September, worse than the market expectations of a 2.7% decline, exerting pressure on the JPY/USD forex pair.


China’s trade surplus shrank to $56.53 billion in October, from $82.35 billion in the year-ago period. The figure fell short of market estimates of $82 billion and sent the CNY/USD pair lower in forex trading this morning.

What else to watch today

South Africa’s foreign exchange reserves, Germany’s industrial production and construction PMI, UK’s house price index, Spain’s industrial production and consumer confidence indicator, France’s construction PMI, Italy’s construction PMI, Singapore’s foreign exchange reserves, Brazil’s value of outstanding loans and Central Bank of Brazil Copom meeting minutes, Mexico’s auto exports and car output, Canada’s balance of trade, US balance of trade, Redbook index, IBD/TIPP economic optimism index, total consumer debt, LMI logistics managers index current, consumer credit and Manheim used vehicle value index, Turkey’s treasury cash balance, China’s foreign exchange reserves, as well as Argentina’s industrial production.


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