Crude rises for third session on supply concerns

The news shaping the markets today

Russia urged Ukraine’s authorities to order their forces to lay down arms, saying it would halt its attack as soon as Kyiv surrenders. The US dollar index traded slightly lower this morning.

Australia’s retail sales grew 0.9% to new record high of A$34.23 billion in May, following a 0.9% rise in the previous month. The latest reading also exceeded market estimates of 0.4% growth, lending support to the AUD/USD forex pair.

Vietnam’s annual inflation accelerated to around a two-year high of 3.37% in June, from 2.86% in May, sending the VND/USD pair lower in forex trading this morning.

Japan’s retail sales climbed by 3.6% year-over-year in May, following 3.1% growth in the previous month. The recent reading also marked the third consecutive month of growth in retail trade, lending support to the JPY/USD forex pair.

Argentina recorded a current account deficit of $1,130 million in the first quarter, compared to a $438 million surplus in the year-ago period. However, the ARS/USD forex pair remained flat after the news.

What’s happening: Crude oil climbed for the third straight day on Tuesday, settling at its highest level since mid-June.

What happened: Oil prices were supported by concerns around the ability of Saudi Arabia and the UAE to significantly increase output.

The reopening of one the major economies also lifted oil demand expectations, lending further support to oil prices.

Why it matters: The OPEC+ (Organization of the Petroleum Exporting Countries and their allies) is scheduled to meet this week and is widely expected to maintain its target of modest output increases.

The ban of Russian oil and gas by Western nations has kept energy prices elevated. Revenues from Russia’s oil exports grew in May, despite a decline in volumes, according to the IEA’s (International Energy Agency) June report. The G7 leaders said they would discuss the possibility of a price cap on Russian oil, with support from China and India.

The UAE and Saudi Arabia are the only OPEC+ members that have the capability to significantly expand oil output. However, the two nations seem to have little room for an expansion in the near term. France’s President Emmanuel Macron told US President Joe Biden during the G7 summit on Tuesday that the UAE was already producing at maximum capacity and Saudi Arabia can raise output by merely 150,000 bpd (barrels per day).

Unrest in Ecuador and Libya also helped oil prices record their strongest finish since mid-June. Libya’s National Oil warned of declaring force majeure in the Gulf of Sirte unless production was resumed at oil terminals.

The American Petroleum Institute (API) late Tuesday reported a decline of 3.799 million barrels in US crude inventories last week, much higher than market expectations for a 110,000 barrel decline.

WTI crude for August delivery climbed $2.19, or 2%, to close at $111.76 per barrel on the NYMEX on Tuesday, notching the highest settlement since June 16.

August Brent crude gained $2.89, or 2.5%, to close at $117.98 per barrel, also recording the highest settlement since June 16. September Brent crude, the most actively traded contract, climbed 2.5% to $113.80 a barrel.

In other energy trading, July gasoline rose around 2.6% to $3.9351 a gallon, with July heating oil declining 0.7% to $4.1994 a gallon. July natural gas gained 0.8% to settle at $6.551 per million British thermal units on the expiration day of contract.

What to watch: Traders await the EIA’s (Energy Information Administration) data on crude oil stockpiles, due to be released today. US crude oil inventories, which rose by 1.956 million barrels in the week ended June 10, are expected to decline by 0.569 million barrels last week. Analysts expect gasoline stockpiles in the US to contract by 0.452 million barrels, while projecting distillate stockpile to rise by 0.328 million barrels in the week.

The reopening of China’s economy is also expected to provide support to oil prices in the near term.

The markets today

The euro will be in focus today ahead of several economic reports from the common bloc

Context: The EUR/USD forex pair moved lower, holding below the 1.06 level on Tuesday.

Details: ECB President Christine Lagarde issued new insights into the central bank’s monetary policy outlook.

The ECB is widely projected to follow the US Fed and Bank of England to announce an interest rate hike next month in a bid to control surging inflation. However, market experts are still divided on the extent of the hike. Experts on average have lowered their expectations from cumulative rate hikes of 280 bps by mid-2023 to around 238 bps.

The US dollar index, which measures the greenback’s performance versus a basket of major currencies, gained around 0.5% on Tuesday, after hitting a two-decade high of 105.79 earlier during the month.

The EUD/USD forex pair lost around 0.6% to close at 1.0522 on Tuesday.

What to watch: Traders await the release of economic data on loans to households,
services confidence indicator and consumer confidence indicator, due to be released today. The consumer confidence indicator in the Eurozone is expected to decline by 2.4 points to -23.6 in June, while the services confidence indicator is projected to decline to 12.5, from 14 in May.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.56%, 2.01% and 3.09%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Spain’s consumer price index, retail sales and industrial confidence indicator, Turkey’s economic optimism index, Eurozone’s loans to non-financial corporations, money supply M3, economic sentiment indicator, industrial confidence indicator and consumer confidence price trends over next 12 months, South Africa’s FNB/BER consumer confidence index, US MBA mortgage applications, GDP growth rate, corporate profits, PCE price index and Fed Chair Powell’s speech, India’s money supply M3, Germany’s inflation rate, Russia’s unemployment rate, real wages, corporate profits, business confidence, retail sales, industrial production, and GDP, as well as NATO summit.