MARKET UPDATE

Oil rises $1 on Russian supply worries, U.S. storm impact eyed

Oil prices rose more than $1 on Friday on expectations of a drop in Russian crude supply, which helped offset worries of a hit to U.S. transport fuel demand growth as a looming Arctic storm threatens travel during the holiday season.

Brent crude was up by 66 cents, or 0.8%, to $81.64 a barrel by 0440 GMT, while U.S. West Texas Intermediate (WTI) crude was at $78.27 a barrel, up 78 cents, or 1% higher.

They hit highs of $82.17 and $78.77, respectively, earlier in the session. Both contracts were on track to post a second weekly gain, with Brent up 3.3% and WTI up 5.4%.

Russia’s Baltic oil exports could fall by 20% in December from the previous month after the European Union and G7 nations-imposed sanctions and a price cap on Russian crude from Dec. 5, according to traders and Reuters calculations.

 

Volatile rouble falls again, cutting short slight recovery

The Russian rouble weakened in early trade on Friday, cutting short a slight recovery in the previous session as fears over oil and gas sanctions unnerved markets, though it got some support from a month-end tax period.

At 0706 GMT, the rouble was 0.8% weaker against the dollar at 69.74, slipping back towards its weakest since April 28 of 72.6325, hit in the previous session.

It had lost 0.4% to trade at 73.87 versus the euro and shed 1% against the yuan to 9.87.

Yuan-rouble trading volumes exceeded 15 billion yuan on Thursday, a record on Moscow Exchange. Russia will start buying yuan on the market next year if oil and gas revenues meet expectations, two sources told Reuters, a report that was later confirmed by Finance Minister Anton Siluanov.

GRAPHIC: Yuan vs dollar trading volumes on Moscow Exchange in 2022 (https://www.reuters.com/graphics/RUSSIA-CHINA/zdpxddgyepx/chart.png)

Market jitters over the impact of an oil embargo and price cap have seen the rouble plunge in recent days, with weekly losses exceeding 15% at its weakest point on Thursday.

 

Asian shares slip on fears that Fed will have to stay hawkish

Asian shares fell on Friday and were set for a second week of losses, while the dollar firmed as strong U.S. data revived fears the Federal Reserve will have to retain its hawkish stance to tame inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1%, snapping a two-day winning streak. Australia’s S&P/ASX 200 index and Japan’s Nikkei also lost 1%.

U.S. weekly jobless claims data pointed to a still tight labour market, while the U.S. economy rebounded faster than previously estimated in the third quarter.

The data “flamed fears that further monetary policy tightening in 2023 will be necessary to cool inflation,” said Tony Sycamore, a market analyst at IG.

Specifically, investors are fretting that the Fed funds target rate could rise higher and stay there longer than previously expected, raising the possibility of an economic contraction.

 

 

 

 

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