Crude Oil Surge – Is it Time to Buy?




A late surge in oil prices yesterday helped global equities extend their gains on Wednesday and Thursday. US oil futures surged by 8% yesterday and were last trading at $31.16 a barrel. Prices were boosted after Iran voiced support to the latest deal between OPEC and Russia to freeze output at January levels.

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The yen was slightly firmer today despite disappointing trade data out of Japan. Exports from Japan slumped by 12.9% year-on-year in January, missing estimates of an 11.3% drop. Imports were down by even more, falling by 18%. The dollar touched a low of 113.74 yen before firming to 113.95 in late Asian session.

The greenback came under pressure yesterday following the release of the minutes of the January FOMC meeting. The minutes noted that uncertainty for the US economic outlook had increased from the recent global developments and that the risks to the medium-term outlook were no longer balanced.

There was more dovish language from the Fed after St. Louis Fed President James Bullard said it would be “unwise” to continue to raise rates given declining inflation expectations. The remarks had limited impact on the dollar though as strong economic data on Wednesday provided some support to the currency.

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The euro continued to trade in its recent three-day range and was last at 1.1130 dollars. The single currency may come under focus later today when the ECB is due to publish its latest monetary policy accounts.

The pound is also likely to see some attention as EU leaders meet in Brussels to negotiate a new deal for the UK’s membership in the EU. Sterling was struggling to hold above 1.43 dollars and was last at 1.4292 dollars.

China’s inflation rate came in below expectations at 1.8% year-on-year in January but the data went largely unnoticed by the Australian dollar which reacted more strongly to the latest Australian jobs figures. Employment in Australia fell by 7.9k in January, defying forecasts of a 15k gain and pushing the unemployment rate up to 6.0%. The aussie declined against the dollar after the data, retreating to 0.7140 and erasing some of yesterday’s strong gains.

The Canadian dollar had more success though in holding onto to its gains after rallying almost 1.5% against the US dollar yesterday on the back of rising oil prices. The greenback fell to a 2-week low versus the loonie in today’s Asian session before rebounding slightly to 1.3683.

Gold prices reversed three days of losses on Wednesday but eased back again today as risk sentiment improved. Prices were slightly down at $1207 an ounce.

Looking ahead to the rest of the day, the ECB’s meeting minutes and US weekly jobless claims will be closely watched along with the outcome of the UK-EU summit.

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