Traders short oil prices amid demand concerns

The news shaping the markets today

Ukrainian President Zelenskiy said Russia is likely to intensify its attack on Kyiv. The RUB/USD forex pair traded higher after the news.

The People’s Bank of China maintained its key rates for corporate and household loans at its latest fixing. The CNY/USD pair rose in forex trading this morning.

New Zealand’s Business NZ Performance of Services Index climbed to 55.2 in May, from 52.2 a month ago. This being the highest reading since June last year lent support to the NZD/USD forex pair.

Colombia’s economy grew by 12% year-over-year in April, following 7.7% growth in the previous month. However, the COP/USD pair declined in forex trading this morning mainly on strength of the US dollar.

US industrial production grew 0.2% in May, following 1.4% growth in the previous month. The Nasdaq 100 index jumped more than 150 points on Friday.

What’s happening: Crude oil declined to a four-week low on Friday and ended the week lower.

What happened: Oil prices came under pressure on Friday amid rising concerns around recession in the US and strength in the greenback.

Energy prices received some support during the week from news related to the US and Iran.

Why it matters: Oil prices tumbled to a four-week low on Friday, after traders shorted riskier assets following news of the US Federal Reserve hiking interest rates. Markets were also concerned about the country’s economy going into recession.

The Fed raised its benchmark rates by 75 bps at its latest meeting, with other major central banks, including the Swiss National Bank and Bank of England, announcing similar moves.

Oil prices received some support on Thursday on news of the US announcing fresh sanctions on petrochemical producers from the Islamic Republic. However, demand concerns due to prolonged lockdowns in China sent oil prices lower last week.

Sentiment for oil was also lifted by the IEA (International Energy Agency) projecting supply growth lagging demand. So far, the OPEC+ members have been unable to meet their production targets. However, the rising US dollar exerted pressure on oil, as prices in the global financial markets are quoted in the currency. A strengthening greenback makes oil more expensive for holders of other currencies.

WTI crude for July delivery fell $8.03, or 6.8%, to close at $109.56 per barrel on the NYMEX on Friday. Oil prices ended the week 9.2% lower after recording gains for seven weeks in a row.

August Brent crude declined 5.6% to settle at $113.12 per barrel on ICE Futures Europe, with prices for the global benchmark down 7.3% for the week, ending four straight weeks of gains.

In other energy trading, July gasoline declined 4.1% to $3.793 a gallon, down 9.1% for the week. July natural gas shed 7% to settle at $6.944 per million British thermal units, recording the weakest settlement since April 28.

Natural gas futures tumbled more than 21% last week, the biggest single-week percentage loss since early December 2021.

What to watch: Investors will keep an eye on surging inflation levels and central bank actions. The release of data on crude oil inventories from the EIA (Energy Information Administration) will also remain in focus this week. US crude oil inventories grew by 1.956 million barrels in the week ended June 10, after a 2.025 million rise in the earlier period.

The markets today

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

Context: Markets in Europe closed mixed on Friday, ending a volatile week on policy decisions from global central banks.

Details: The European blue-chip index had recorded sharp losses on Thursday, declining around 2.5% amid a sell-off in equities worldwide after several central banks, including the US Federal Reserve, aggressively raised interest rates in a bid to combat surging inflation.

ECB policymaker Klaas Knot also said that several rate hikes could be announced in case inflation worsens in the Eurozone. Data released on Friday showed inflation in the Eurozone surging to a record high of 8.1% year-over-year in May, accelerating from 7.4% in the previous month.

The pan-European Stoxx 600 index rose around 0.1% to close at 403.25 on Friday. Tech stocks led the gains, adding more than 1% in the session. Oil and gas stocks fell around 4% on declining oil prices.

Shares of ABN Amro Bank NV gained around 6% on Friday, after news of BNP Paribas looking to acquire the Dutch bank. Shares of Nokian Tyres also climbed more than 10%, after the company raised its net sales forecast for 2022.

London’s FTSE 100 fell 0.41% to close at 7,016.25, while the CAC 40 lost 0.06% on Friday. Germany’s DAX 40 gained 0.67% in the session.

What to watch: Traders await construction output data from the Eurozone today, which had risen by 3.3% year-over-year in March and is expected to decline 5% in April.

Markets will also keep an eye on the ECB’s non-monetary policy meeting and general council meeting later this week.

Other Markets: US indices closed mostly higher on Friday, with the S&P 500 and Nasdaq 100 up by 0.22% and 1.24%, respectively, and the Dow Jones index down 0.13%.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s producer price inflation and Bundesbank monthly report, Turkey’s tourist arrivals and government debt, Indonesia’s motorbike sales, as well as Central Bank of Brazil’s focus market readout.