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What’s happening: Crude oil began the week with losses, after surging for seven consecutive weeks.
What happened: Crude oil moved lower on Monday amid prospects of weakness in demand from China and strength in the US dollar.
However, the downside was limited by the International Energy Agency’s latest monthly report projecting a further rise in oil prices.
Why it matters: Markets have been weighing the demand-supply situation in the oil market against weak demand from China, the world’s largest crude importer, and tightening of supply by top crude exporters.
Meanwhile, higher-than-expected data on producer inflation from the US increased speculations of the Federal Reserve keeping rates higher for longer, which lent support to the greenback.
Strength in the US dollar exerted pressure on oil prices. A stronger dollar generally makes commodities, like oil, more expensive for buyers holding foreign currencies. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained over 0.3% to 103.19 on Monday.
In its monthly report on Friday, the IEA had said that supply cuts by OPEC+ (Organization of the Petroleum Exporting Countries and its allies) majors Saudi Arabia and Russia are likely to erode crude oil inventories through the remaining of the year, while global crude demand could increase to a record 103 million barrels per day.
WTI crude oil for September delivery declined by 68 cents to close at $82.51 per barrel on Monday, after falling more than $1 per barrel earlier in the session. Brent crude for October delivery lost 60 cents to settle at $86.21 per barrel.
In other energy trading, wholesale gasoline for September delivery slipped 6 cents to $2.91 a gallon, while September heating oil declined 3 cents to $3.09 a gallon and September natural gas added 2 cents to $2.80 per 1,000 cubic feet on Monday.
What to watch: Traders await the release of the API’s (American Petroleum Institute) data on crude oil stockpiles today. US crude inventories had increased by 4.067 million barrels in the week ended August 4.
The release of the EIA’s (Energy Information Administration) data on crude oil stockpiles, due Wednesday, will also remain in focus.
Context: The GBP/USD forex pair edged lower on Monday as traders awaited key data for insights into the Bank of England’s upcoming rate decisions.
Details: Data released on Friday showed that the British economy had grown by 0.5% in June, topping market expectations of 0.2% growth, and recovering from a 0.1% contraction in May.
The British economy grew by 0.4% year-over-year, higher than the 0.2% expansion during the first three months of the year.
The higher-than-expected data fuelled speculations of the Bank of England continuing to hike interest rates. Traders now await earnings and employment reports, due today, and data on consumer price inflation, due Wednesday, for further insights into the central bank’s next move.
The Bank of England had raised its main interest rate to a 15-year high earlier this month. The interest rate was raised by 25bps to 5.25%, which was the bank’s 14th month of hikes.
The GBP/USD forex pair slipped around 0.1% to $1.2687 on Monday.
What to watch: Traders await the release of wage, employment and labour productivity data from the UK today. The unemployment rate, which increased to 4.0% in March to May, is expected to remain unchanged at 4% in June. Average weekly earnings, including bonuses, which grew by 6.9% year-over-year to £651 per week in the three months to May, is projected to rise by 7.1% in June. Analysts expect labour productivity in the UK to fall by 0.2% in the second quarter, following a 1.4% decline in the first three months of 2023.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.07%, 0.58% and 1.18%, respectively.
The US announced plans to send new military assistance worth $200 million to Ukraine. The news sent the safe-haven US dollar index lower this morning.
China’s industrial production rose 3.7% year-over-year in July, versus 4.4% growth in June. The figure also came in below market expectations of 4.4% and exerted pressure on the CNY/USD forex pair.
Australia’s seasonally adjusted wage price index rose by 3.6% year-over-year in the second quarter, which sent the AUD/USD pair higher in forex trading this morning.
Japan’s economy expanded by 6.0% in the second quarter, versus 3.7% growth in the previous period. The figure also came in significantly higher than market estimates of 3.1% and lent support to the JPY/USD forex pair.
Colombia’s retail sales declined by 11.9% year-over-year in June, the most in around 3 years, which sent the COP/USD pair lower in forex trading this morning.
Saudi Arabia’s wholesale prices change and inflation rate, Central Bank of Russia’s interest rate decision, Turkey’s central government budget balance, Eurozone ZEW economic sentiment index, Germany’s ZEW economic sentiment index and ZEW indicator of current conditions, South Africa’s unemployment rate, number of unemployed persons, Canada’s inflation rate, manufacturing sales and car registrations, US retail sales, NY Empire State manufacturing index, import prices, export prices, Redbook index, NAHB/Wells Fargo housing market index, business inventories, net long-term TIC flows, net treasury international capital flows and net purchases of US treasury bonds and notes, as well as Argentina’s inflation rate.
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