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Trends & Analysis
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Buy the JPMorgan dip?

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Crude oil slides 4% after Saudi Arabia price cuts

Tuesday, January 09, 2024

Today’s headlines

What’s happening: Crude oil prices fell sharply on Monday amid sharp price reductions by Saudi Arabia.

What happened: Crude prices climbed last week on rising geopolitical concerns.

However, Saudi Arabia’s price cuts and an increase in OPEC (Organization of the Petroleum Exporting Countries) output sent oil prices lower by more than 4% on Monday.

Why it matters: Both WTI and Brent added more than 2% during the first week of 2024, as investors remained concerned about escalating geopolitical risks.

The OPEC and its allies had decided to reduce crude production by 2.2 million bpd (barrels per day) this quarter in a bid to support prices.

However, on Sunday, Saudi Aramco slashed the official February selling price of Arab Light Crude to Asian customers by $2 to $1.50 per barrel above the benchmark to the weakest level in 27 months, amid continuing market weakness following record US crude production and easing Chinese demand.

OPEC’s production surged by 70,000 bpd to 27.88 million in December as increases in production by Iraq, Angola, and Nigeria counterbalanced production cuts by Saudi Arabia and other OPEC+ nations.

US pumped an estimated 13.2 million bpd of crude during the final week of last year, while its inventories of gasoline and distillate jumped by more than 10 million barrels each. US crude exports also climbed by over 1 million bpd to 5.2 million bpd during the same period.

Oil drilling rigs in the US rose by 1 to 501 rigs last week and the country is expected to add more than 20 oil rigs this year.

Brent crude for March delivery declined by $2.64 to close at $76.12 per barrel, while WTI crude for February delivery shed $3.04 to settle at $70.77 per barrel on Monday.

In other commodities trading, wholesale gasoline for February delivery declined 8 cents to $2.03 a gallon, while February heating oil slipped 3 cents to $2.58 a gallon. February natural gas bucked the trend and gained 9 cents to $2.98 per 1,000 cubic feet.

What to watch: Investors await the release of API’s (American Petroleum Institute) data on crude oil stockpiles today. US stockpiles of crude oil had contracted by 7.418 million barrels in the week ended December 29, after an increase of 1.837 million barrels in the prior week.

The release of EIA’s (Energy Information Administration) data on crude oil stockpiles, due to be released on Wednesday, will also remain in focus. Crude oil inventories in the US declined by 5.503 million barrels in the week ended December 29.

The markets today

The Canadian dollar will be in focus today ahead of a couple of major economic reports

Context: The CAD/USD forex pair moved higher on Monday, as investors assessed the Bank of Canada’s future monetary policy.

Details: Investors remained cautious about the Bank of Canada’s upcoming decision on interest rates after the country released some mixed economic reports.

Data released on Friday showed employment in Canada rising by just 100 in December, compared to an increase of 24,900 in November. The figure was also much better than market estimates of 13,500.

Canada’s unemployment rate came in unchanged at 5.8% in December, versus the previous month. This was better than market expectations of 5.9%. The average hourly wage growth for permanent employees rose to an annual rate of 5.7% in December, from 5.0% in the previous month.

The Ivey Purchasing Managers Index for Canada increased to 56.3 in December, from November’s reading of 54.7 and topping market estimates of 54.2. This marked the fifth straight month of expansion in the country’s economic activity.

Weakness in the US dollar lent support to the CAD/USD forex pair on Monday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell by more than 0.1% to 102.21.

A sharp decline in the price of crude oil, one of Canada’s major exports, limited the loonie’s overall gains on Monday. WTI crude oil futures fell more than 4% to $70.77 per barrel.

The CAD/USD forex pair rose around 0.2% to 1.3348 on Monday. The S&P/TSX Composite Index gained 0.66% to close at 21,074.91, with oil-related stocks among the worst performers.

What to watch: Investors await the release of economic data on balance of trade and building permits from Canada today. Canada had recorded a trade surplus of C$2.97 billion in October and is expected to report a surplus of C$2 billion in November. The total value of building permits in Canada, which increased by 2.3% to $11.2 billion in October, is projected to decline by 1.7% in November.

Other Markets: European indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.06%, 0.74%, 0.40% and 0.38%, respectively.

The news shaping the markets

Germany’s Chancellor Olaf Scholz urged EU nations to provide further military assistance to Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.


The Philippines said its manufacturing production growth accelerated to 2.2% year-over-year in November, versus a 1.1% increase in the prior month, which lent support to the PHP/USD forex pair.


Australia’s retail sales grew by 2.0% in November, topping market expectations of 1.2% and sent the AUD/USD pair higher in forex trading this morning.


Japan said the core CPI for the Ku-area of Tokyo increased 2.1% year-over-year in December, versus a 2.3% rise in the previous month, which lent support to the JPY/USD forex pair.


South Korea recorded a current account surplus of $4.06 billion in November, representing a contraction from the surplus of $6.8 billion reported in the previous month. Yet, this being the seventh consecutive month of growth sent the KRW/USD pair higher in forex trading this morning.

What else to watch today

Germany’s industrial production, France’s balance of trade and current account, Italy’s unemployment rate, US NFIB small business optimism index, balance of trade, Redbook index, RealClearMarkets/TIPP economic optimism index, and LMI logistics managers index current, Eurozone’s unemployment rate, as well as Mexico’s consumer price index, auto exports and car output.


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