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What’s happening: Oil prices settled lower on Friday but recorded gains for the week on US crude withdrawals.
What happened: A decline in US crude and gasoline inventories and rising geopolitical concerns lent support to oil prices last week.
Crude oil prices moved lower on Friday on some profit taking and strength in the US dollar.
Why it matters: Oil prices ended the week on a lower note but recorded sharp weekly gains as geopolitical concerns continued to lend support.
Meanwhile, demand concerns eased after the release of data by the Energy Information Administration. US crude inventories contracted by 2.5 million barrels last week, compared to market expectations of a decline of 2 million barrels. Gasoline stockpiles declined by 2.3 million barrels, versus market estimates of a gain of 1.10 million barrels.
The EIA also reported on Friday that US supplies of natural gas surged by 71 billion cubic feet in the week ended June 14. Analysts were expecting a rise of 72 billion cubic feet. Supply data was released a day later than normal due to the Juneteenth holiday on Wednesday.
Strength in the US dollar exerted pressure on oil prices, as higher a 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 more than 0.2% to 105.83 on Friday.
Meanwhile, business activity in the US, the world’s biggest oil consumer, climbed to a 26-month high in June.
WTI crude oil for August delivery fell 56 cents to close at $80.73 a barrel on the NYMEX (New York Mercantile Exchange). WTI ended the week with gains of around 3.4%. August Brent crude fell 47 cents to close at $85.24 a barrel on ICE Futures Europe. The global benchmark notched a gain of 3.2% last week. Both oil benchmarks also recorded gains of around 4% in the previous week.
In other energy trading, July gasoline added 1 cent to $2.51 a gallon, while July heating oil fell 1.4% to $2.702 a gallon and natural gas for July delivery fell 1.5% to $2.700 per million British thermal units on Friday.
What to watch: Investors await the release of some major economic reports from the US, including GDP growth and core PCE price index, which is expected to provide some direction to oil prices ahead. Movements in the US dollar will also remain in focus this week.
Context: European stock markets settled lower on Friday as investors monitored economic data from the Eurozone and the ECB’s rate decision.
Details: Equity markets in Europe recovered after recording losses last week, following French President Emmanuel Macron’s decision to call for a snap parliamentary election. Even France’s CAC 40 index notched weekly gains after logging sharp losses a week ago.
Earlier this month, the European Central Bank had cut its benchmark interest rate by 25 bps to 3.75%. The Bank of England held interest rates unchanged at a 16-year high of 5.25%, while the Swiss National Bank lowered rates by 25 bps to 1.25%. Norway’s central bank also kept rates unchanged on Thursday.
Data released on Friday showed UK’s retail sales volumes grew by 2.9% in May, coming in well ahead of market estimates of a 1.5% gain.
The Eurozone services PMI fell to 52.6 in June, from May’s reading of 53.2. The figure also missed market estimates of 53.5. The Eurozone manufacturing PMI dipped to a six-month low of 45.6 in June, while the composite PMI declined to 50.8 in June, from 52.2 in the prior month.
The STOXX Europe 600 Index shed 0.73% to close at 515.11 on Friday, with bank stocks losing around 1.5%.
London’s FTSE 100 fell 0.42% to settle at 8,237.72, while Germany’s DAX 40 and France’s CAC 40 lost 0.50% and 0.56%, respectively.
What to watch: Investors await the release of economic data on the Ifo business climate index, Ifo current conditions subindex and Ifo business expectations index from Germany today. Analysts expect the Ifo Business Climate indicator to rise to 89.7 in June, from 89.3 in May, while the Ifo current conditions subindex is projected to increase to 88.4 in June, from 88.3 in May. The Ifo business expectations index, which rose for a fourth straight month to 90.4 points in May, is expected to increase further to 91 in June.
Other Markets: US trading indices closed mixed on Friday, with the S&P 500 and Nasdaq 100 down by 0.16% and 0.26%, respectively, and the Dow Jones index up by 0.04%.
Russia held the US responsible for Ukraine’s attack on the city of Sevastopol. The news sent the RUB/USD slightly higher in forex trading this morning.
Canada’s retail sales grew by 1.8% year-on-year in April, accelerating from 1.7% in March. The figure coming in lower than market expectations exerted pressure on the CAD/USD forex pair.
China said foreign direct investments (FDIs) had declined by 28.2% year-on-year to 412.5 billion yuan from the January to May period. This marked a record decline for the first five months of the year and sent the CNY/USD lower in forex trading this morning.
US existing home sales declined 0.7% to a seasonally adjusted annualised rate of 4.11 million units in May. Although this marked the lowest level in four months, the US dollar index rose slightly this morning.
Mexico’s economic activity jumped 5.4% year-on-year in April, the sharpest rise since August 2022. Despite this being higher than estimates of 3.8%, the MXN/USD declined slightly in forex trading this morning.
Saudi Arabia’s balance of trade, Turkey’s manufacturing confidence index, capacity utilisation and gross foreign exchange reserves, UK’s CBI industrial trends orders, Brazil’s FGV-IBRE consumer confidence index, current account, foreign direct investment and Central Bank of Brazil’s focus market readout, Mexico’s consumer prices, US Dallas Fed manufacturing index, Spain’s consumer confidence indicator, as well as Argentina’s leading economic index, gross domestic product and unemployment rate.
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