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Crude reverses trend to settle higher on Friday

 

Monday, November 20, 2023

Today’s headlines

What’s happening: Crude oil rose on Friday but still recorded losses for the week.

What happened: A steep increase in US crude inventories and the property crisis in China had resulted in a sharp decline in oil prices last week.

Despite gains on the last trading day of the week, crude oil recorded the fourth straight week of losses.

Why it matters: Crude oil prices fell to a four-month low on Thursday following soft economic reports from the US and China.

The EIA’s latest data release also showed US crude oil stockpiles growing by 17.5 million barrels over the past two weeks, which took inventories to their highest level in two-and-a-half months.

Oil prices rebounded on Friday on news that the US Treasury Department had imposed sanctions on three shipping companies for exporting Russian crude at prices higher than the $60 per barrel cap set by the G7.

Data released by Baker Hughes on Friday showed the total number of active US oil rigs had risen by 6 units to 500 rigs during the latest week.

Weakness in the greenback also lent support to oil prices. The US Dollar index, which measures the greenback’s performance versus a basket of major peer, fell around 0.5% to 103.82 on Friday.

On Thursday, WTI and Brent crude were trading 22.2% and 19.8% lower that their respective 52-week highs of $93.68 and $96.55 recorded on September 27. This also triggered some buying and helped reverse the downtrend.

WTI crude for December delivery gained $2.99, or 4.1%, to close at $75.89 per barrel on the NYMEX (New York Mercantile Exchange). However, WTI ended the week lower by around 1.7%. January Brent crude gained $3.19, or 4.1%, to settle at $80.61 per barrel on ICE Futures Europe, down around 1% for the week.

In other energy trading, December gasoline rose 4% to $2.18 a gallon, while December heating oil climbed 0.8% to $2.77 a gallon on Friday. Natural gas for December delivery declined by 3.3% to $2.96 per million British thermal units, settling at its weakest level since October 23.

What to watch: Investors will continue monitoring the economic condition of the world’s leading crude importer, as China’s growth could provide a significant boost to oil prices ahead. The release of weekly crude oil supplies data will also remain in focus.

Markets will watch the next meeting of the OPEC+ (Organization of the Petroleum Exporting Countries and its allies), scheduled for November 26, with growing speculations of the cartel deciding on further output cuts. Saudi Arabia’s voluntary output reduction, which started in July, will expire at yearend.

The markets today

European stocks will be in focus today ahead of construction output data

Context: European equity markets settled higher on Friday, after recording losses in the prior session.

Details: Data released on Friday showed the Eurozone’s inflation rate had eased to 2.9% year-over-year in October. Although the rate is still higher than the ECB’s 2% target level, the October reading marked the lowest rate since July 2021.

Speculations of the central bank having reached the end of its monetary tightening cycle lent support to the stock markets.

The Eurozone also posted a current account surplus of €40.78 billion for September, representing the largest surplus in more than two years.

Italian insurance leader Assicurazioni Generali reported around 30% growth in its adjusted net profits for the first nine months of the year, while London Stock Exchange Group raised its mid-term growth forecast and announced a £1 billion share repurchase plan.

The STOXX Europe 600 index gained 1.01% to close at 455.82 on Friday, with all sectors settling in the positive zone. Financial services and mining stocks were among the top performers during Friday’s session.

Germany’s DAX 40 added 0.84% to reach 15,919.16, while France’s CAC 40 climbed 0.91% to settle at 7,233.91.

London’s FTSE 100 rose around 1.26% to 7,504.25 amid an easing of inflation figures, although data released on Friday showed the UK’s retail sales declining by 0.3% in October, versus market expectations of 0.3% growth.

What to watch: Investors await economic data on construction output from the Eurozone today. Construction output in the bloc had declined by 0.1% year-over-year in August and is expected to growth by 1.5% in September.

Other Markets: US trading indices closed slightly higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.01%, 0.13% and 0.03%, respectively.

The news shaping the markets

The Ukrainian army said it had pushed Russian military forces back three to eight kilometres from the banks of the Dnipro river. The news sent the safe-haven US dollar index slightly lower this morning.


Thailand’s economy grew by 0.8% in the third quarter, accelerating from 0.2% growth in the second quarter, which lent support to the THB/USD forex pair.


The People’s Bank of China held its lending rates at the recent fixing, sending the CNY/USD pair higher in forex trading this morning.


Ireland’s Credit Union Consumer Sentiment Index increased to 61.9 in November, from 60.4 in the prior month. This being the strongest level in three months lent support to the EUR/USD forex pair.


Canada’s industrial producer prices declined by 1% in October, versus a 0.4% rise in the prior month, which sent the CAD/USD pair higher in forex trading this morning.

What else to watch today

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


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