Lower Open Likely For US Markets: Oil Zooms

Lower open likely for the U.S. markets Monday after U.S. equity-index futures stood lower.

Futures on Dow Jones, S&P 500, and Nasdaq in the morning pointed to a negative open.

In the U.S, the corporate reporting season is on. Market participants are also watching whether the dovish policy of central banks can perk up global growth to outpace a potential contraction in earnings.

Oil up

Oil prices hit a whopping $74 a barrel on Monday, the highest price since November. In a clampdown on Iranian oil exports, the United States will soon ask buyers of Iranian oil to end imports or face sanctions, according to sources.

Olivier Jakob, an analyst at Petromatrix said, this is a “bullish surprise for the market.”

Brent crude, the global benchmark, jumped 3.3 percent to $74.31 a barrel, the highest since Nov. 1.

The U.S. West Texas Intermediate climbed 2.9 percent to $65.87, again, the highest since Oct. 3 from $65.81.

The U.S reimposed sanctions on Iranian oil exports after President Donald Trump pulled out of a 2015 nuclear accord last year.

But waivers were granted to Iran’s eight main buyers — China, India, Japan, South Korea, Taiwan, Turkey, Italy, and Greece to continue limited purchases for another six months. That period is ending now.

An almost complete cut in Iranian exports would squeeze supply in a market already tight from the U.S. sanctions against Venezuela and OPEC's own cuts.

Iran’s top oil customers China and India had been lobbying for an extension to the sanction waiver.

Asian markets mixed

On Monday, Asian stocks were mixed. Australia and Hong Kong were on holiday. Japan’s Nikkei 225 closed fractionally higher. The Topix gained 0.1 percent. South Korea’s Kospi closed flat. Mainland Chinese shares were marginally up. The Shanghai composite slipped 1.7 percent and Shenzhen lost 1.86 percent.

Gold moves up

Gold prices staged a comeback from a four-month low. After trading resumed the bullion gained traction on clues of higher crude rates.

Spot gold was up 0.4 percent at $1,279.48 per ounce, as of 0325 GMT, up from the $1,270.63 in the previous session.

The U.S. gold futures also moved up 0.5 percent higher at $1,281.70 an ounce.

“Gold climbed slightly ... benefiting from higher oil prices driven by geopolitical tensions. With regional equity markets coming under pressure, gold could be a principal beneficiary in today’s session,” Jeffrey Halley, a senior market analyst with Oanda commented.

Gold is a hedge against oil-led inflation. The rising crude prices will grace gold as well.