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Oil burns brighter on China easing restrictions

 

Wednesday, November 30, 2022

The news shaping the markets today

Ukraine’s Foreign Minister Dmytro Kuleba has urged NATO members for faster deliveries of weapons to help the country restore its energy grid. The US dollar index traded slightly lower this morning.


China’s official NBS manufacturing PMI fell to a seven-month low of 48 in November, from 49.2 in the prior month. Despite this, the CNY/USD forex pair traded higher on prospects of easing restrictions in the country.


Australia’s total construction work done in the third quarter rose 2.2%, surpassing market expectations of 1.5%, and sent the AUD/USD pair higher in forex trading this morning.


Japan’s industrial production contracted by 2.6% in October, following a 1.7% decline in the prior month. However, the JPY/USD forex pair rose mainly due to weakness in the US dollar.


South Korea’s industrial production fell by 3.5% in October. However, the KRW/USD pair climbed in forex trading this morning.

 

What’s happening: WTI crude oil settled higher on Tuesday as traders monitored news from China.

What happened: Oil prices recorded gains amid prospects of China relaxing some of its covid-19 restrictions.

Speculations of output cuts by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) also provided support to oil.

Why it matters: China has controversially re-imposed strict restrictions in several regions to curb the spread of the virus. The latest announcement of curbs resulted in unprecedented protests against President Xi Jinping’s zero-covid policy.

WTI oil prices had declined sharply in early trading on Monday, erasing gains for the year for a brief period, as protests across China raised concerns around a further hit to demand.

Two weeks ago, reports had emerged of the OPEC+ looking to increase output by 500,000 barrels due to the upcoming EU embargo on Russian oil. Prices rebounded on Tuesday amid prospects of a big reduction in output by the OPEC+ group.

WTI prices were also supported by the announcement of plans by China’s National Health Commission to bolster vaccinations for the elderly in the country and ease covid-19 restrictions. The authority lowered the gap between basic vaccination and booster doses to three months for people older than 80 years.

WTI crude for January delivery gained 96 cents to close at $78.20 per barrel on the NYMEX on Tuesday, after prices dipped to their weakest intraday level since December last year on Monday. However, January Brent crude declined 16 cents to settle at $83.03 per barrel on ICE Futures Europe.

In other energy trading, December gasoline was unchanged at $2.33 a gallon, while January natural gas climbed 4 cents to $7.24 per million British thermal units.

The American Petroleum Institute, late Tuesday, released data showing crude oil stockpiles in the country had contracted by 7.85 million barrels in the week ended November 25, after a decline of 4.819 million barrels in the prior week.

What to watch: Traders will keep an eye on the Western price cap on Russia’s crude oil. The EIA’s report on crude oil stockpiles will also remain in focus. US crude oil inventories, which fell by 3.691 million barrels in the week ended November 18, is expected to decline by another 2.758 million barrels in the latest week.

Data on gasoline and distillate stockpiles will also be released today. US gasoline inventories are expected to increase by 1.625 million barrels, while distillate stockpiles are projected to rise by 1.457 million barrels in the latest week.

The markets today

The euro will be in focus today ahead of inflation data from the common bloc

Context: The EUR/USD forex pair traded slightly lower on Tuesday, following several economic reports.

Details: The European currency regained some momentum earlier on Tuesday, as traders responded to several economic reports from the region.

Eurozone’s economic sentiment rose for the first time since February, amid a recovery in consumer confidence. The consumer confidence indicator climbed by 3.6 points to -23.9 in November, while the services confidence indicator rose slightly to 2.3.

Inflation in Spain declined for the fourth month in a row in November, while consumer price inflation in Germany also unexpectedly eased to 10.0% year-over-year in the month.

The ECB said it remains committed to hike interest rates in a bid to control surging inflation. Expectations are for the central bank to raise its benchmark interest rate by 75bps at next month’s meeting.

European equities failed to hold gains recorded earlier in the session and settled slightly lower on Tuesday. The benchmark Stoxx Europe 600 fell 0.13% to close at 437.29, following losses in tech and consumer shares.

The euro rose close to $1.04, near its highest level in around five months. However, the EUR/USD forex pair also did not hold onto gains, dropping around 0.1% to settle at 1.0331 on Tuesday. The euro is on course to end November higher by around 5%, driven by weakness in the US dollar and Treasury yields.

What are expectations: Traders await inflation data from the Eurozone today. Eurozone’s consumer price inflation, which was revised lower to 10.6% year-over-year in October, is expected to ease to 10.3% in November. Analysts expect the CPI (consumer price index) to rise 0.2% in November, versus a 1.5% gain in October.

Markets will also keep an eye on the ECB’s non-monetary policy meeting, scheduled to take place today.

Other Markets: US indices closed mostly lower on Tuesday, with the S&P 500 and Nasdaq 100 down by 0.16% and 0.73%, respectively, and the Dow Jones index up by 0.01%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0339 and 1.0356 Positive
USD/CHF – 0.9521 and 0.9538 Negative
Copper – 3.6351 and 3.6526 Negative
Platinum  – 1013.15 and 1017.10 Negative
S&P 500 – 3943.77 and 3962.00 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0347, 0.15%) Dow ($33,876, 0.06%) Brent ($84.87, 0.7%)
GBP/USD (1.1977, 0.22%) S&P500 ($3,964, 0.05%) WTI ($78.77, 0.7%)
USD/JPY (138.63, -0.06%) Nasdaq ($11,528, 0.03%) Gold ($1,750, 0.1%)

What else to watch today

Germany’s unemployment rate, unemployed persons, unemployment change and import prices, Turkey’s GDP growth rate, France’s inflation rate, GDP growth rate and producer price inflation, Spain’s retail sales and current account, Italy’s gross domestic product, inflation rate and consumer price index, India’s Central government budget value, GDP growth rate and infrastructure output, Brazil’s unemployment rate and government budget value, South Africa’s balance of trade, US MBA mortgage applications, ADP employment change, GDP growth rate, goods trade balance, wholesale inventories, corporate profits, price index for personal consumption expenditures, Chicago PMI, job openings, pending home sales and Fed Beige book,  Russia’s GDP, money supply M2, real wages, retail sales, business confidence and unemployment rate, Australia’s CoreLogic dwelling prices, as well as UK’s Nationwide house price index.


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