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What’s happening: Crude oil prices settled higher on Monday, extending last month’s gains.
What happened: Oil prices climbed on expectations of higher energy demand due to forecasts of the US witnessing a harsher and prolonged summer.
News of India’s elevated imports of crude also pushed prices higher, breaching the $83 mark.
Why it matters: Oil prices ended June with gains of around 6% due to fears of tensions in the Middle East disrupting supply. Predictions of an above-normal hurricane season in the US further fuelled supply concerns.
Expectations of higher demand for energy also supported oil prices. Forecasts of the heat wave across the central, southern, and southeastern US persisting through July 7 sent crude prices higher.
The US reporting an easing in inflation also sent oil prices higher. The core Personal Consumption Expenditure (PCE) price index, the Federal Reserve’s preferred gauge of inflation, eased to 2.6% in May, from 2.7% in April. The data release triggered speculations of the US central bank cutting interest rates at the September meeting. Lower interest rates boost economic growth, which in turn increases the demand for energy.
India imported 5.33 million barrels per day (mb/d) of crude in June, from its three largest suppliers, Russia, Iraq and Saudi Arabia. S&P Global Commodity Insights forecasts India purchasing a similar quantity of crude in the current month.
WTI crude oil for August delivery rose 2.26% to close at $83.38 a barrel on the NYMEX (New York Mercantile Exchange) on Monday. August Brent crude, the global benchmark, fell 1.88% to settle at $86.60 a barrel on ICE Futures Europe.
What to watch: Investors await the release of data on inventories by the API (American Petroleum Institute) today and by the EIA (Energy Information Administration) on Wednesday. Last week, the API reported an increase in US crude oil inventories of 0.914 million barrels for the week ending June 21, while the EIA announced a rise in crude stockpiles of 3.591 million barrels in in the same peek, compared with market expectations of a decline of 3 million barrels in the prior week.
Context: European stock markets settled higher on Monday, with the Stoxx 600 index closing in the red after four straight days of losses.
Details: Equity markets in Europe were driven by a sharp rise in France’s CAC 40, which climbed more than 2.5% during the session.
French President Emmanuel Macron’s decision to call for a snap parliamentary election sent the country to begin voting over the weekend. The results, scheduled to be declared on July 7, are widely expected to favour the far-right party. This would make Jordan Bardella, 28, the youngest Prime Minister in the French National Assembly, the lower house of parliament.
Markets also responded to the upward revision in the HCOB Eurozone manufacturing PMI to 45.8 for June, versus a preliminary estimate of 45.6. Despite the improvement, the figure shows output contracting at the fastest pace year to date.
Markets rejoiced the decline in Germany’s annual inflation rate to 2.2% in June, from 2.4% in May, preliminary estimates showed. The figure was also better than expectations of 2.3%.
The STOXX Europe 600 Index rose 0.32% to close at 513.04 on Monday. London’s FTSE 100 added 0.03% to settle at 8,166.76, while Germany’s DAX was up 0.30% at 18,290.66. France’s CAC 40 recorded the maximum gains, climbing 1.09% to finish trading at 7,561.13.
What to watch: Investors await the release of inflation and unemployment data from the Eurozone today. The region’s annual inflation rate had accelerated to 2.6% in May, from 2.4% in the previous month, and is expected to ease to 2.5% in June.
The Eurozone’s unemployment rate, which had hit a new record low of 6.4% in April, is expected to remain flat in May.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.13%, 0.27% and 0.83%, respectively.
Ukraine has released over 3,000 prisoners on parole to join the military in its war with Russia. The news sent the RUB/USD slightly lower in forex trading this morning.
The US reported a surprise decline in the ISM manufacturing PMI to 48.5 in June, from 48.7 in May. Despite the figure coming in below market expectations of 49.1, representing the third straight month of contracting manufacturing activity, the US dollar index remained broadly flat at 105.93 on Monday.
Mexico’s manufacturing business confidence indicator fell by 0.7 points to 53 in June. This representing the lowest level since April 2023 exerted pressure on the MXN/USD forex pair.
South Korea’s annual inflation rate slowed to 2.4% in June, from 2.7% in a month earlier. The figure also came in better than market expectation of 2.7%, lending support to the KRW/USD forex pair.
The Reserve Bank of Australia kept its cash rate unchanged at 4.35% at its June meeting, sending the AUD/USD slightly lower in forex trading this morning.
The US JOLTs job openings and Fed Chairman Jerome Powell’s speech, South Korea’s foreign exchange reserves for June and Australia’s Judo Bank composite PMI for June.
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