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What’s happening: Crude oil prices settled higher on Friday, as investors assessed the latest inventories data.
What happened: Oil prices recorded gains last week in low trading volume, following a bigger-than-expected decline from US crude stockpiles.
Rising geopolitical concerns also provided a boost to oil prices on Friday.
Why it matters: Data released by the Energy Information Administration showed US crude oil inventories declined by 4.3 million barrels in the week ended December 20 with the holiday season providing a boost to fuel demand. Analysts were expecting a lower decline of 2 million barrels for the week.
Data also showed distillate fuel stockpiles declined by 1.7 million barrels during the week, versus market estimates of a decline of 700,000 barrels. Gasoline inventories rose by 1.6 million barrels, compared to expectations of a decline of 1 million barrels.
Markets grew increasingly optimistic about China’s economic growth, the top crude importing nation, which raised prospects of higher demand for oil next year. The World Bank had last week raised its projections for China’s economic growth for the current and next year.
Authorities in China also announced plans to issue 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to stimulate economic growth.
The ongoing war between Russia and Ukraine is also expected to impact oil supplies going ahead.
Some weakness in the US dollar also lent support to oil prices, as a lower greenback makes commodities cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 108.01 on Friday.
WTI crude for February delivery rose 98 cents, or 1.4%, to close at $70.60 per barrel on the NYMEX (New York Mercantile Exchange), while February Brent crude climbed by 91 cents, or 1.2%, to settle at $74.17 per barrel on ICE Futures Europe.
Both WTI and Brent crude climbed around 1.4% for the week.
In other energy trading, January gasoline gained 0.6% to $1.9582 a gallon, while January heating oil rose 1.8% to $2.2448 a gallon on Friday. January natural gas fell 5.4% to settle at $3.514 per million British thermal units.
What to watch: Investors will continue monitoring rising geopolitical concerns, which are expected to significantly impact oil demand ahead. Volatility in the US dollar is also projected to weigh on oil prices.
Context: Equity markets in Europe settled higher on Friday, as investors monitored the European Central Bank’s monetary policy outlook.
Details: Earlier this month, the ECB had slashed its benchmark interest rate by 25 basis points, in-line with market estimates. The latest rate cut was the fourth in the current monetary tightening cycle, with the central bank also signalling further rate cuts next year.
Overall trading volume remained thin ahead of the New Year’s holiday, while many markets remained closed last week for the Christmas holiday.
Shares of banks and auto producers were among the top performers, with UniCredit, BNP Paribas and Volkswagen gaining around 2% each during the session.
The STOXX Europe 600 Index rose 0.67% to close to 507.18 on Friday. London’s FTSE 100 gained 0.16% to 8,149.78, while Germany’s DAX 40 and France’s CAC 40 added 0.68% and 1%, respectively.
The EUR/USD forex pair slipped 0.01% to 1.0427 this morning, while the EUR/GBP gained 0.04% to 0.8296.
What to watch: Investors await the release of economic data on Spain’s inflation rate (1200 UAE Time) and current account (1300 UAE Time), due to be released today. Spain’s annual inflation rate, which rose to a four-month high of 2.4% in November, from 1.8% in October, is expected to accelerate further to 2.6% in December. Analysts expect Spain to report a current account surplus of $4.3 billion in October, compared to a €4.1 billion surplus in September.
Data on manufacturing PMI, loans to companies, loans to households and M3 money supply from the Eurozone, scheduled for release later this week, will also remain in focus.
Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.77%, 1.11% and 1.36%, respectively.
US President Joe Biden’s administration announced plans for new military assistance, including air defence systems, to help Ukraine in its ongoing war with Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Japan’s au Jibun Bank manufacturing PMI rose to 49.6 in December, above the flash reading of 49.5 and higher than November’s reading of 49.0. However, the region’s factory activity remaining in the contraction zone exerting pressure on the JPY/USD forex pair.
Brazil’s value of outstanding loans grew by 1.2% to R$6.3 trillion in November, versus a 0.5% rise in October, which sent the BRL/USD pair lower in forex trading this morning.
South Korea’s retail sales rose by 0.4% in November, rebounding from a revised 0.8% decline in the previous month, which lent support to the KRW/USD forex pair.
The US goods trade deficit widened to $102.86 billion in November, compared to a revised $98.3 billion gap in the previous month, which sent the Nasdaq 100 lower by more than 1% on Friday.
Brazil’s gross debt to GDP (1530 UAE Time) and nominal budget balance (1530 UAE Time), Canada’s CFIB business barometer (1600 UAE Time), as well as US Chicago PMI (1845 UAE Time), pending home sales (1900 UAE Time), Dallas Fed manufacturing index (1930 UAE Time), 3-month bill auction (2030 UAE Time) and 6-month bill auction (2030 UAE Time).
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