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Oil Burns Brighter Amid New Sanctions on Russia

The news shaping the markets today

Australia’s manufacturing PMI fell to 57.0 in February, from a preliminary reading of 57.6, exerting some pressure on the AUD/USD forex pair.


Colombia’s unemployment rate eased to 14.6% in January, from 17.5% in the year-ago month. However, the COP/USD pair declined slightly in forex trading this morning.


Chile’s industrial production contracted by 1.1% year-over-year in January, following 1.7% growth a month ago. Despite this being the first decline since September 2021, the CLP/USD forex pair remained elevated.


Poland’s gross domestic product grew 7.3% year-over-year in the fourth quarter, versus a 5.3% expansion in the earlier three-month period. However, the PLN/USD pair declined in forex trading this morning.


Sweden’s retail sales grew 5.1% year-over-year in January, compared to 4.1% growth in the prior month. The country’s retail sales climbed for the 13th straight month, lending support to the SEK/USD forex pair.

 

What’s happening: Crude oil traded sharply higher on Monday amid the ongoing Russia-Ukraine crisis.

What happened: Brent crude surged past $100 per barrel on Monday, after the Western nations announced more sanctions on Russia following its invasion of Ukraine.

Investor sentiment improved during the day on hopes of a ceasefire after Russia and Ukraine agreed to begin talks.

Why it matters: The first round of peace talks between Russia and Ukraine ended on Monday with no real breakthrough, although the two nations have agreed to keep talking.

Russian forces continued to shell Ukraine’s second-largest city Kharkiv, while moving closer to its capital, Kyiv.

Oil prices gained sharply after the US, UK and EU announced plans to block some Russian banks from the SWIFT international payment system, which would significantly disrupt the country’s exports of commodities, including oil.

Referring to the sanctions, Commerzbank analyst Carsten Fritsch said in a note to clients, “Russia could retaliate to these harsh measures by reducing or even completely suspending energy shipments to Europe.”

Meanwhile, Goldman Sachs analysts raised their one-month projections for Brent crude from $95 to $115 per barrel.

The IEA (International Energy Agency) members are expected to begin tapping into its strategic oil reserves, including 40 million barrels from the US.

WTI crude for April delivery gained $4.13, or 4.5%, to close at $95.72 per barrel on the NYMEX, after surging to $99.10 earlier in the session. Brent crude for April surged $3.06 to settle at $100.99 per barrel, after hitting $105 in early trade. The global benchmark contract expired at the end of the trading session and Brent’s May contract gained $3.85 to close at $97.97 per barrel.

April natural gas declined 7 cents to $4.40 per million British thermal units, while March gasoline added 7 cents to $2.80 a gallon.

What to watch: The ongoing conflict between Russia and Ukraine will remain in focus, with markets carefully monitoring talks between the nations.

Traders will also keep an eye on the OPEC+ (Organization of the Petroleum Exporting Countries and its allies), which is set to meet on Wednesday to decide oil production levels for April. The cartel has already lowered its 2022 projections for the oil market surplus by around 200,000 bpd to 1.1 million bpd.

The API (American Petroleum Institute) is scheduled to release data on crude oil stockpiles later today. US crude inventories had grown by 5.983 million barrels in the week ending February 18, following a decline of 1.076 million barrels in the prior week.

The markets today

European stocks will be in focus today ahead of manufacturing data from the common bloc

 

Context: European stocks settled slightly lower on Monday with investors tracking developments around the Russia-Ukraine conflict.

Details: Russia continued its military advance into Ukraine sending hundreds of tanks into Kharkiv and closing in on Ukraine’s capital city. Russian troops continued to attack Ukraine, even with the commencement of talks near the Belarus-Ukraine border on Monday.

Meanwhile, the Western nations announced more sanctions on Russia, removing some key Russian banks from the SWIFT messaging system. Several European countries and Canada closed their airspace to Russia’s planes.

With investors rushing to safe-haven options, the EUR/USD forex pair fell to 1.1223 on Monday. Shares of BP fell 5% after the company announced plans to exit its stake in Russian firm Rosneft.

The pan-European Stoxx 600 index slipped 0.09% to close at 453.11 on Monday, with banking stocks leading the losses, down more than 4% amid the new sanctions.

Spain reported a current account deficit of €1.31 billion in December, versus a surplus of €0.92 billion in the year-ago month. The country’s annual inflation rate also accelerated to 7.4% in February. Spain’s IBEX 35 lost 0.09% to close at 8,479.20 on Monday.

The FTSE 100 fell 0.42% to settle at 7,458.25, after the UK announced to ban Russia’s entities from its money markets and transferable securities.

The DAX 40 shed 0.73% to close at 14,461.02, notching losses for a second straight month. The CAC 40 settled at 6,658.83, down 1.39%.

What to watch: Markets will continue monitoring the developments surrounding the Russia-Ukraine crisis.

Traders also await the release of manufacturing PMI from the Eurozone. The IHS Markit Eurozone manufacturing PMI is expected to decline to 58.4 in February, from 58.7 in the previous month.

Other Markets: US indices closed mixed on Monday, with the Dow Jones index and S&P 500 down by 0.49% and 0.24%, respectively, and the Nasdaq 100 up by 0.34%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.1219 and 1.1222 Negative
CAC 40 – 6,652.24 and 6,695.76 Negative
DAX 40 – 14,417.81 and 14,531.38 Negative
WTI Crude Oil – 95.25 and 95.80 Positive
Natural Gas – 4.382 and 4.402 Positive

 

Market snapshot

What else to watch today

Russia’s manufacturing PMI, Germany’s retail sales, inflation rate and manufacturing PMI, Turkey’s manufacturing PMI, Spain’s manufacturing PMI and total vehicle sales, Italy’s manufacturing PMI, car registrations, government budget, GDP growth and inflation rate, France’s manufacturing PMI and car registrations, South Africa’s manufacturing PMI and total vehicle sales, UK’s mortgage lending, consumer credit, mortgage approvals, manufacturing PMI, and net lending to individuals, Mexico’s business confidence, manufacturing PMI and government budget value, India’s balance of trade, exports and imports, Canada’s GDP growth rate and manufacturing PMI, US Redbook index, Markit manufacturing PMI, ISM manufacturing PMI, construction spending, Dallas Fed services index and Logistics Manager’s Index, as well as Brazil’s balance of trade.


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