Oil prices have risen noticeably over the past few days. Brent climbed to $74.8 per barrel in the morning, gaining almost 5% since the beginning of the week, Commerzbank’s commodity analyst Carsten Fritsch notes.
The conflict in Ukraine escalates
“This week's rise in oil prices was probably triggered by the latest escalation in the war in Ukraine, which has now been going on for more than 1,000 days. In recent days, Russia has carried out heavy attacks on the energy infrastructure and civilian infrastructure in Ukraine. Ukraine has responded by attacking targets in Russia with longer-range weapons systems provided by the West.”
“This raises concerns that energy supplies from Russia could be interrupted if Ukraine targets refineries or export terminals in Russia, which has already happened in the past. Three refineries in Russia recently had to suspend or reduce their processing, as Reuters reported, citing five industry sources. The reasons given included deteriorating margins as a result of higher local crude oil prices and more expensive financing conditions.”
“In addition, the three refineries mentioned have already been hit by Ukrainian drones this year, which has reduced their processing capacity. The prospect of lower Russian diesel exports also caused the gasoil crack spread to rise to just under $19 per barrel this week. The last time it was this high was at the beginning of August.”
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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