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Trends & Analysis
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News

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Crude oil settles higher, but records weekly loss

 

Monday, August 21, 2023

Today’s headlines

What’s happening: Crude oil settled higher on Friday, following the release of some important economic data.

What happened: Although supply constraints lent support to oil prices on Friday, crude ended the week in the red, for the first time in eight weeks.

Concerns over weak demand from China and strength in the US dollar kept crude oil prices in check last week.

Why it matters: Data released on Friday showed US oil and natural gas rig count, an early indicator of future output, had declined for the sixth straight week, lending support to oil prices on Friday.

Output cuts from the OPEC+ (Organization of the Petroleum Exporting Countries and allies) had kept oil prices elevated, helping crude to record gains for seven weeks in a row. WTI crude added 20% and Brent crude around 18% over the seven weeks ended August 11.

However, continued weak economic reports from China, the world’s second-largest crude oil consumer, hurt investor sentiment last week.

US Treasury yields also surged, with the 10-year yield rising to a 15-year high last week. The US dollar has also made strong gains, impacting oil prices. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.5% last week and has added approximately 1.5% so far in August.

WTI crude oil for September delivery gained 86 cents, or 1.1%, to close at $81.25 per barrel on Friday, while Brent crude for October rose 68 cents, or 0.8%, to settle at $84.80 per barrel. WTI crude oil recorded a weekly loss of 2.3% and Brent crude was down 2.3%. This marked the first weekly loss for both WTI and Brent futures since June.

In other energy trading, September gasoline fell around 0.1% to $2.82 a gallon, down 4.8% for the week. September heating oil gained 2.1% to $3.16 a gallon, rising 1.2% for the week. September natural gas declined by 2.7% to $2.55 per million British thermal units, recording a weekly decline of 7.9%.

What to watch: Traders will watch supply data from the US EIA (Energy Information Administration) this week. Markets will also monitor the US dollar and growth trends in major economies.

The markets today

European stocks will be in focus today after closing lower on Friday

Context: European stocks retreated during the last trading session of the week, mirroring the cautious moves made by global equity markets.

Details: Investors continued to monitor comments by policymakers to get an idea of interest rate hikes by major central banks in the back half of the year. Concerns around the Chinese real estate sector have also hurt investor risk appetite.

The STOXX Europe 600 Index fell 0.61% to close at 448.44 on Friday. Mining stocks fell 1.5% and retail stocks declined by around 1.2%, with almost all major sectors closing in the negative zone.

The European index had also ended Thursday’s session lower after the minutes from the US Federal Reserve’s latest meeting showed that further interest rate hikes were not off the table. The index lost around 1.5% last week.

London’s FTSE 100 fell 0.65% to close at 7,262.43 on Friday, recording its sixth straight session of closing in the red. The index ended the week with losses of around 3.3%. The UK reported a decline in retail sales of 1.2% in July, more than market expectations of a 0.5% contraction.

Germany’s DAX 40 and France’s CAC 40 lost 0.65% and 0.38%, respectively, on Friday.

What to watch: With no major economic report from the Eurozone today, investors await the release of economic data on manufacturing, services and composite PMIs from the bloc later this week.

Other Markets: US trading indices closed mixed on Friday, with the S&P 500 and Nasdaq 100 down by 0.01% and 0.14%, respectively, and the Dow Jones index up by 0.08%.

The news shaping the markets

Dmitry Medvedev, Deputy Chairman of the Security Council of the Russian Federation, said the war with Ukraine could go on for decades. Despite this, the safe-haven US dollar index moved slightly lower this morning.


The People’s Bank of China cut its one-year loan prime rate by 10bps to a record low of 3.45%, exerting pressure on the CNY/USD forex pair.


New Zealand’s trade deficit shrank to $1.107 billion in July, from $1.415 billion in the year-ago period. The country’s imports declining by 16% to $6.6 billion sent the NZD/USD pair lower in forex trading this morning.


Indonesia’s residential property prices rose by 1.92% year-over-year in the second quarter, after a 1.79% increase in the prior period, which exerted pressure on the IDR/USD forex pair.


Canada’s raw materials price index rose 3.5% in July, versus a 2% decline in June. However, the CAD/USD pair moved higher in forex trading this morning.

What else to watch today

Germany’s producer price inflation, Canada’s new housing price index, Turkey’s government debt, Spain’s consumer confidence, as well as Central Bank of Brazil’s focus market readout.


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