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In April, Canada’s core Consumer Price Index rose 0.5%, surpassing predictions.
The Bank of Canada’s Consumer Price Index Core for April went up by 0.5%, which is higher than the expected 0.2% increase. This information is important for understanding inflation trends in Canada’s economy.
The EUR/USD is currently around 1.1260, influenced by a weakening US Dollar amid economic worries. Meanwhile, the GBP/USD is approaching 1.3370, affected by Moody’s downgrade of the US credit rating and upcoming UK inflation data.
Osborne notes a slight decline in the US dollar due to reduced trading activity during the holidays.
The US Dollar is trading a bit lower today, partly due to the North American holiday schedule which has led to less active trading. There are signs that the recent rebound in the USD may be leveling off.
The Australian Dollar (AUD) has weakened after the Reserve Bank of Australia (RBA) cut the Cash Rate by 25 basis points to 3.85%, signaling further easing. This cut has also affected the New Zealand Dollar (NZD) ahead of New Zealand’s trade data release. Additionally, the People’s Bank of China (PBoC) lowered benchmark rates to historic lows, which is further influencing the performance of the AUD.
Currency Movements
The Chinese Yuan (CNY) is slightly down, while currencies like the Mexican Peso (MXN) and South African Rand (ZAR) are gaining strength against the USD. European and Asian stocks are performing well, but US equity futures are showing declines due to worries over global trade and slowing economic growth in the US, linked to tariff policies. Risk reversal pricing indicates a growing bearish sentiment towards the dollar, evidenced by increased demand for EUR calls. The Dollar Index (DXY) is maintaining a downward trend, recently touching 102, but there are signs of a potential pullback from last week’s peak, hinting at possible further declines. Currently, we are witnessing a brief period of calm across forex markets, as traders assess a mix of central bank actions, softer US economic data, and low trading volume due to the holiday break in North America. The slight dip in the US Dollar reflects less participation rather than a major shift in direction. However, it appears that the recent increase in the Dollar might be stabilizing, as momentum is slowing and the lack of follow-through near recent highs is notable. The RBA’s unexpected decision to cut its cash rate to 3.85% has sent a clear dovish signal to the market. This shift affects not only Australian conditions but also alters trader perceptions around nearby currencies. The already vulnerable New Zealand Dollar has faced additional pressure ahead of its trade data release. This is part of a broader change in interest rate expectations in the Asia-Pacific region. China’s rate changes are significant. The PBoC’s move to set rates at new lows is aimed at supporting markets that are anticipating decreased domestic demand. This strategy has impacted how the Australian Dollar is viewed, keeping it stable while other risk currencies try to gain traction.Market Dynamics
Some emerging market currencies are showing strength, particularly the Mexican Peso and the South African Rand, which are gaining against the USD. This divergence is meaningful, as emerging market currencies are becoming more responsive to changes in interest rates rather than capital flows, contrasting with the slower G10 currencies. In the equity markets, European and Asian indices are performing well thanks to strong domestic resilience and lowered interest rate expectations. This stands in stark contrast to the US futures, which are facing more pressure due to concerns about ongoing trade issues and their impact on US economic growth. There’s a sense of caution as more weak economic data is reported. Looking at the options market, the sentiment is shifting. Risk reversals indicate a trend against the Dollar. Although not overly dramatic, there’s increased interest in EUR calls, signaling expectations for further Euro strength. This trend is evident even as the Euro remains stable within its range, suggesting a growing confidence among traders. The technical outlook for the DXY indicates a steady downward trajectory. Last week’s peak above 104 now appears to limit upward momentum. The index quickly dropped to 102, which was anticipated by spot traders, but the subsequent recovery has been weak. A clean break below that level could trigger swift movements across correlated currency pairs, potentially impacting EURUSD and USDJPY. Volatility levels remain low, so traders need to be cautious of asymmetric risks as central banks communicate their policies. With the RBA’s dovish pivot and the PBoC’s continued easing, there’s increased pressure on the Federal Reserve to clarify its strategy. In terms of positioning, funding currencies are regaining attention as carry trades unwind and yield spreads narrow. This is an important shift, even if it’s not making headlines. With the USD weakening broadly and risk-taking becoming more selective, rebalancing is underway. For those involved in derivatives, pricing shifts in volatility and option skew are offering new entry points that weren’t available two weeks ago. As spot ranges tighten and macro forces build, the focus should be on anticipating where momentum might realign with direction rather than chasing immediate trends. Right now, we are seeing early signs of fatigue and the potential for a change in direction, rather than confirmed trends. What remains unpriced is just as crucial as what is already accounted for. Close monitoring of rate markets and options sentiment will be essential for those seeking directional insights rather than pursuing risks. Create your live VT Markets account and start trading now.Flexible Solutions International, Inc. reported lower-than-expected earnings in the first quarter of 2025.
Flexible Solutions International, Inc. reported a loss of 2 cents per share in the first quarter of 2025. This was down from a gain of 4 cents per share in the same quarter last year, and it fell short of the anticipated 5 cents.
The company’s revenues for the quarter were about $7.5 million, which is a decline of roughly 19% from the previous year. This also missed expectations of $10.2 million.
Sales of Energy and Water Conservation products dropped by about 3% to around $0.04 million because of fewer orders. Biodegradable Polymers sales fell about 19% to $7.4 million.
At the end of the quarter, the company had cash reserves of about $9.6 million, an increase of around 26% from the previous quarter. They also reduced long-term debt by 2%, bringing it to about $6.5 million.
Customers returned to regular ordering after the first quarter, and new opportunities in various sectors are likely to boost future sales. The company believes its cash reserves will be enough for upcoming financial needs.
Over the past year, the company’s shares have risen impressively by 102.4%, while the Zacks Chemicals Specialty industry saw only a 0.6% decline.
Despite a significant year-over-year drop in both revenue and earnings for the first quarter of 2025, Flexible Solutions International, Inc. seems to be in a solid financial position. Earnings per share fell from a modest 4 cents last year to a loss of 2 cents, against expectations of a 5 cent profit. This suggests a more considerable decline in demand or pricing power than expected. The notable underperformance may point to margin pressures or delays in buying, especially considering the disappointing sales of Biodegradable Polymers.
This revenue source, which makes up nearly all sales, dropped almost 19% to $7.4 million—a substantial decline. The slight decrease in Energy and Water Conservation products, while minor, could reflect customers being more cautious rather than an issue with the products themselves. It’s more encouraging that management mentioned customers returned to regular ordering after the quarter ended, suggesting that the softness in demand might be temporary.
While overall sales have contracted, the balance sheet shows a different story. Cash reserves increased by over 26% to $9.6 million, providing some flexibility. This indicates that the company is not likely to raise capital soon. Moreover, long-term debt decreased slightly to $6.5 million, showing efforts to manage finances without losing liquidity.
Even with currently weak sales, it’s important to note that the company’s shares have risen 102.4% in the past year. This shouldn’t be overlooked, especially when compared to a 0.6% drop in the broader specialty chemicals market, according to Zacks. This shows that investors are either optimistic about a turnaround or appreciate the company’s financial management and growth potential. The question remains whether current valuations hold up after this earnings miss.
In the near term, investors should keep an eye on when and how the return to normal ordering affects revenue. These changes often take several months to show up in earnings reports. It’s also essential to be aware of sector trends. Sales of Biodegradable Polymers often follow broader sustainability trends, which can shift based on regulations, public sentiment, and raw material costs.
Management’s mention of “new opportunities” in various markets should not be dismissed. This indicates that actions are likely underway, such as deal activity, product repositioning, or new distribution strategies.
In the coming weeks, market sentiment may fluctuate as it reacts to the earnings miss and adjusts perceptions of growth—whether it’s just delayed or fundamentally impaired. As a result, prices may experience volatility. We will focus on monitoring input costs, customer order sizes over the next two to three months, and any new business announcements. If there are no changes to debt or liquidity actions, it will support our belief that operations are the priority.
We will carefully observe how prices respond to volume signals, especially if the market considers this quarter a low point—a scenario that could suggest a rebound is on the horizon.
Quarterly Financial Summary
| Metric | Q1 2025 | Q1 2024 |
|---|---|---|
| Earnings per Share | -0.02 | 0.04 |
| Revenues | 7.5 million | 9.2 million |
| Cash Reserves | 9.6 million | 7.6 million |
| Long-term Debt | 6.5 million | 6.6 million |
The Australian dollar drops to 0.6415 against the US dollar after expected RBA rate cut
The Australian Dollar (AUD) has fallen to 0.6415 against the US Dollar (USD) after the Reserve Bank of Australia (RBA) cut its benchmark interest rate by 25 basis points to 3.85%. This change was anticipated by financial markets, with major banks predicting the cut beforehand.
After the rate cut, the AUD/USD rate dipped about 0.65% to 0.6408, reversing modest gains from Monday. Political instability in Australia and a rate cut by the People’s Bank of China added to concerns about economic growth, leading to a weaker AUD.
RBA Rate Cut and Global Influences
The RBA observed that inflation risks are decreasing, as inflation has dropped since its peak in 2022 due to higher interest rates. Governor Michele Bullock noted that the global economic outlook has deteriorated, mentioning tariff announcements by US President Donald Trump and ongoing uncertainties around the world. Even with the rate cut, the Australian Dollar got some support from a weaker US Dollar. The US Dollar Index (DXY) continued to decline, affected by a downgrade in the US credit rating to Aa1 and worries about the fiscal outlook following new tax cuts. Right now, sentiment around the Australian Dollar is compressing, primarily due to the RBA’s decision to lower interest rates. While expected, this cut marks a shift in domestic monetary policy, reflecting slowing inflation and, more urgently, weakening global demand. Efforts by Bullock and her team to control inflation seem to be showing results, though there are costs involved. Tuesday’s drop in the AUD/USD pair to below 0.6410 highlights not just domestic policy actions but a broader skepticism about regional growth. With China’s central bank also lowering rates, investor confidence in growth across Asia-Pacific remains shaky. The currency markets view these dual monetary policies from Australia and China as cautious signals regarding an export-driven recovery.Market Responses and Derivative Strategies
There’s an interesting shift in relative attractiveness: as US bond yields decline and the DXY falls due to downgraded creditworthiness, the strength of the US Dollar is diminishing. Fitch’s downgrade of US credit to Aa1, alongside worries about federal deficits, has weakened confidence in US dollar-denominated assets. However, the response from the Australian Dollar has been lackluster. From a derivatives perspective, this presents a complex situation. There are short opportunities where pairings have been unable to exceed the 0.6440 mark. Premiums on short-term AUD/USD put options remain high, indicating potential further declines. This is supported by a slight spike in volatility, favoring AUD puts. Traders may consider options strategies that capitalize on this weakness. Put spreads with wider strikes could provide value, especially if there’s an expectation of continued softness in rate-sensitive sectors or commodities tied to China’s economic direction. Similarly, traders focusing on volatility might find gamma scalping useful, especially around the 0.6380–0.6410 range, where price movements have been hesitant. It’s important to remember that the weakening isn’t just due to expectations around central banks. Political risks, both domestically and internationally, are adding unpredictability. Disruptions within Australia’s fiscal discussions combined with Trump’s trade remarks are nudging markets into more defensive positions. This blend of policy adjustments and leadership risks calls for careful analysis of not only economic data but also narrative developments. In the coming trading sessions, it will be important to monitor how the AUD behaves against the Dollar and how uncertainty is valued over time. Interest rate derivatives show moderate expectations for further easing, though not rapid enough to suggest a complete easing cycle. Nevertheless, tail-risk hedging is attracting higher premiums, indicating that not all market participants are on the same page concerning equilibrium. We also see a slight flattening in implied volatility for shorter maturities, even though realized volatility has been high over the past three weeks. For tactical traders, this might indicate that directional trades offer more value than betting on volatility breakouts—at least until a clearer direction emerges. Derivative traders should pay attention to where open interest is stable and look for settlement clusters near key strike levels. The 0.6400 level is gaining attention, and any sustained move below could reignite selling momentum, especially if commodity data weakens or US stock indices falter. At this point, the most likely path is slightly downward, unless US fiscal news takes a positive turn or Chinese data exceeds expectations. In any case, any rebound may encounter upward pressure from ongoing policy concerns and widespread geopolitical tensions. Above all, we approach our positions with a focus on volatility, not merely price direction, adjusting our strategies as signals from rate markets and macroeconomic data develop. Create your live VT Markets account and start trading now.Gold prices stabilize amid ongoing geopolitical tensions and recent comments from Fed officials.
Gold prices rose on Tuesday after the US credit rating was downgraded by Moody’s. President Trump also suggested that the US might back away from peace talks around the Russia-Ukraine conflict, influencing market feelings.
Gold is currently trading around $3,240, bouncing back from earlier losses due to comments from the Federal Reserve. Atlanta Fed President Raphael Bostic warned that we might need 3 to 6 months to see how the market reacts to the downgrade.
US Construction And Economic Factors
In recent permitting news, the US approved the Stibnite project in Idaho, which will involve a gold and antimony mine. This decision came after Moody’s downgrade, with US equity-index futures dropping by 0.3% and gold demand declining by 0.5%. From a technical standpoint, gold faces resistance at $3,245 and again at $3,271, needing a big reason to break through. On the downside, support levels are found at $3,207, $3,200, and $3,185, with deeper support possibly as low as $3,167, also touching the 55-day simple moving average at $3,151. Central banks aim for price stability while tackling inflation and deflation challenges through policy rate adjustments. These decisions are made by an independent board, led by a chairman who balances differing views, while keeping inflation close to 2%. The content above shows how sensitive the precious metals market is to credit ratings and political news, especially regarding the US government’s financial credibility and changing diplomatic stances. Moody’s downgrade triggered market disruption, and comments from Federal Reserve officials, particularly Bostic, suggest that the market may take weeks or months to fully respond.Market Response And Future Implications
This situation indicates that we may see ongoing shifts, especially in safe-haven assets like gold. After a brief dip, gold has rebounded to around $3,240. However, reaching and holding above $3,245 may require strong support from inflation data or statements from central banks. If this doesn’t happen, support levels can provide some backing, but failure to hold could see gold price drop as low as $3,151 at the 55-day moving average. Currently, the short-term outlook for precious metals futures is very responsive to central bank comments and geopolitical surprises, particularly those with financial impacts. The approval of the Stibnite project, which will mine both gold and antimony, adds new factors to supply expectations. However, the market’s reaction to this news has been mild, with futures and demand slightly decreasing. Meanwhile, central bank policy is still influencing interest rate expectations. The 2% inflation target guides decisions, though there is continuous debate about the pace of adjustments. With diverse opinions among committee members, split decisions have occurred. While these institutions can act independently, political pressures remain, especially in significant economic periods. It’s prudent to consider that prolonged periods of stable rates or signals of easing might support metal prices, even if other sectors experience short-term volatility. Moving forward, the timing and clarity of policy decisions will be crucial. These aspects will lead to more shifts in positioning. There’s a higher chance of short squeezes or sudden adjustments at resistance levels due to the current market sentiment. The upcoming path heavily relies on data. With employment and consumer activity reports expected soon, these numbers will likely determine whether we reach higher technical levels or struggle at critical support points. We should stay adaptable, recognizing that even minor policy changes, in light of unexpected political events, can significantly affect implied volatility and risk premiums. It’s essential not to be complacent regarding position sizing or timing. Create your live VT Markets account and start trading now.UK secures trade deal with the EU, leading to a stronger Pound Sterling against its rivals.
Global Economic Challenges
The strong partnership between the UK and the EU comes as global economic challenges loom, particularly after recent US tariff expansions. The UK’s April Consumer Price Index (CPI) data is expected soon, with core inflation likely rising to 3.7% and headline CPI to 3.3%. These changes may influence the Bank of England’s decisions on interest rates. The Chief Economist of the BoE suggests a careful stance regarding interest rate cuts. Meanwhile, the US Dollar faces pressure due to a downgrade by Moody’s and ongoing trade disputes with China, affecting its exchange rate. The Pound Sterling is trading positively, holding strong above important levels against the US Dollar. With the US Dollar under pressure and the UK forging stronger economic ties, the Pound continues to rise. This is due to diplomatic progress and encouraging economic data. Moody’s recent credit rating change indicates shifting global risk perceptions, reducing demand for US Dollar positions and drawing interest toward more stable or rising currencies. While Moody’s downgrade was not entirely unexpected, it highlighted existing concerns about US governmental debt sustainability. This quickly influenced foreign exchange markets, resulting in a drop in USD demand, particularly against currencies supported by strong policy signals and stable political environments. On the trade front, the US has made moves against China’s AI chip supply chains, increasing tensions. Beijing has raised concerns about protectionism, adding uncertainty to markets already reacting to recent tariff shifts. These developments have made investors wary of risky dollar investments, prompting them to seek more balanced portfolios.Sterling Support and Economic Alignment
In this context, the Pound found support from technical momentum and growing confidence among institutions. The recent “reset” in UK-EU relations has revived connections that had weakened after Brexit. Joint efforts in areas like SPS standards and collective defense show a commitment to stability instead of sudden policy changes. Participation in EU defense investments, although modest financially, has broader implications for long-term political and fiscal cooperation. The SPS aspect of the recent agreement may not be widely publicized, but it allows smoother trade in agrifood, boosting both exports and inward investments in UK logistics and processing. A £360 million investment in fishing also indicates a commitment to stabilize industries affected by Brexit. Upcoming inflation data this month is anticipated to be significant. With core CPI expected at 3.7% and headline CPI closer to 3.3%, all eyes are on Threadneedle Street. Huw Pill’s encouragement for careful consideration before rate cuts makes sense; inflation is still well above the 2% target, and concerns about ongoing price growth persist. From our view, reducing rates early could be premature given the recent stickiness of wage data. If the inflation report comes in as expected or higher, it may push any dovish stance deep into Q3, giving the Pound more leverage over currencies tied to central banks already easing their policies. On a technical level, the Pound’s stability above crucial support levels indicates more than just speculation. This month, the broad trade-weighted index also moved higher, suggesting real money flows are reflecting these political and economic changes. We see these price movements as significant. Now, it’s important to assess their stability against potential surprises from US monetary policy or further global trade tensions. Practically, this means closely monitoring policy statements, especially from the BoE and the Fed. Any deviation from current forecasts—like a faster pace of loosening by the Fed due to slowing US data—could further extend the Pound’s recovery beyond short-term resistance levels. This creates a sensitive situation in derivatives pricing. Volatility levels are being tested in options markets, and the shift toward a stronger Pound shows a preference based on political stability and relative monetary firmness. Traders need to pay close attention to the BoE’s statements and upcoming US economic data—not just the headline figures. The details of inflation will be crucial. If service-sector inflation continues to rise, amidst ongoing supply constraints, we might see an even stronger bias toward the Pound. There’s also a reason to keep an eye on cross-asset correlations in the coming days. The Pound’s performance increasingly reflects synchronized support from policies, trade agreements, and careful monetary management. In a world of uncertainty, that’s a solid foundation. Create your live VT Markets account and start trading now.UOB Group analysts expect the USD/CNH to rise slightly, staying within a range of 7.1850 to 7.2450.
The US Dollar is expected to rise slightly, but it won’t likely reach the resistance level of 7.2330. Right now, it may trade between 7.1850 and 7.2450 since the downward momentum has mostly faded.
In the short term, the currency is predicted to move between 7.1990 and 7.2190, closing at 7.2140, which is a slight increase of +0.06%. While some upward momentum is building, it’s not strong enough to break through 7.2330. There is also resistance at 7.2250 and support levels at 7.2100 and 7.2000.
Analysts Outlook On USD
Analysts have kept a negative view on the USD since early this month. The USD’s failure to drop means its decline towards 7.1700 seems unlikely unless it breaks above 7.2330. Instead, the USD is expected to stay between 7.1850 and 7.2450 due to the reduced downward momentum. It’s crucial to do thorough research before making any financial decisions, as markets carry risks and uncertainties, including possible losses. No specific investment advice is provided; all information should be independently verified for accuracy and completeness. The Dollar’s movements show hesitation to commit strongly in either direction. Trading in the 7.1850 to 7.2450 range indicates a market waiting for a clearer push, but neither buyers nor sellers seem eager. The recent uptick in short-term momentum has raised it to 7.2140, but not strongly enough to overcome resistance levels at 7.2250 or 7.2330. When we say upward momentum is developing but not strong enough to break resistance, we notice the price trying to rise but being met with selling pressure. This happens when traders who bought at lower prices take profits or when new sellers enter the market. Support between 7.2100 and 7.2000 is still intact, but if the price dips below that range, we’ll need to see a significant change in volume or another trigger to confirm a move. Chan’s earlier view that the Dollar might weaken hasn’t exactly been wrong; however, the lack of a downward move has made it hard for that prediction to fully materialize. It now faces some hesitation. This suggests that the market isn’t fully rejecting the idea of a decline, but conditions don’t support it yet. Therefore, we’re not forecasting a drop to 7.1700 unless we see a break above the current resistance. Until then, the sideways movement between familiar levels favors range-based strategies over breakouts.Market Strategy And Signals
This means focusing on short bursts of volume at the range edges. If the price is rejected near the upper limit without breaking past 7.2330, a downward shift may happen again. Conversely, closing above 7.2330 wouldn’t just be a minor change; it would show real buyer commitment. On the lower end, if there’s a clean drop below 7.1990 with increased selling, it could open a path toward 7.1850. However, this is something to monitor rather than act on immediately. From our standpoint, it’s not the time to chase gains unless there’s a confirmed break and hold above the high end of the range. Neutral setups often become clearer when there’s uncertainty in direction. We’re focusing on the price reactions rather than predicting the next move. Let the reactions at the edges guide our views. Today’s bounce was modest and feels fragile without broader market support. It looks like risk appetite is low, so shorter time frames may reveal clearer signals. We will concentrate on volume at key levels and ignore the noise in between. Create your live VT Markets account and start trading now.Commerzbank analyst notes that electric mobility growth is reducing global oil demand, particularly in China.
The International Energy Agency (IEA) reports that the electric vehicle (EV) market is growing rapidly, especially in China and various emerging markets. Last year, sales reached 17 million EVs, a 25% increase from the previous year.
China leads in global sales with 11 million electric vehicles, where nearly every second new car sold is electric. Meanwhile, growth in Europe and the US has slowed a bit.
Projected Global Sales
The IEA expects global sales to hit 20 million EVs this year, making up a quarter of all car sales. By 2030, electric vehicles are likely to represent 40% of car sales, which could reduce oil consumption by replacing 5 million barrels daily. Currently, electric vehicles account for only 0.7% of total electricity use, but this is expected to rise to 2.5% by 2030. However, these projections come with risks and uncertainties. This data should not be seen as a recommendation to buy or sell any assets. It’s essential to do thorough research before making any investment decisions. The information provided here is for informational purposes only, and we accept no responsibility for any potential errors or omissions. These figures highlight a significant shift in demand for transportation, particularly in China, which is ahead of other nations. With almost half of new car sales being electric, the replacement of petrol and diesel cars is happening faster than expected. What’s noteworthy is not just the volume of sales but the speed of this transition, even as policies change and competition increases.Implications For Energy And Commodities
In contrast, the situation in the US and parts of Europe warrants close observation. The slowdown reflects short-term caution rather than a long-term decline. Challenges like infrastructure issues and cost concerns continue to impact feelings about EV adoption, especially in areas outside cities. However, growth hasn’t disappeared; it has just adapted to current economic conditions. These regions could see renewed growth once vehicle prices decrease and charging stations become more widespread. With an expected 20 million electric vehicles to be sold this year, we’re nearing a point where one in every four new cars globally will be electric, not just in early-adopter countries. This milestone has effects beyond car sales—it will impact power generation, battery materials, and oil consumption. If the goal of 40% market share for EVs by 2030 is achieved, it could result in the loss of up to 5 million barrels of oil each day. This change will affect fuel margins, transportation costs, and shipping fees where diesel is heavily used. Energy traders should already be noticing these effects in pricing and volatility around crude oil. The relationship between car sales and actual oil demand is well-established, and while substitution rates vary based on local electricity sources, there are significant implications for fuel traders, particularly those dealing with urban transportation fleets. On the power grid side, electric vehicles currently consume about 0.7% of total electricity. By the end of the decade, this could rise to 2.5%. Although this may seem modest, it will put added pressure on peak-hour demand and alter load expectations in areas with high EV adoption. We might see a growing divide between regions that embrace this demand and those struggling to upgrade their power infrastructure. Additionally, the growth of the EV market is drawing attention to battery supply chains. Price movements for lithium, cobalt, and nickel are now closely linked to vehicle demand. Many commodity markets are already anticipating supply constraints, making it essential for traders to consider the interplay between battery materials and oil prices, especially if changes in subsidies or tax policies affect sales trends. While forward estimates carry uncertainty and may not always reflect actual outcomes, they provide a framework for understanding market trends. In this case, we are looking at a consistent shift away from combustion engines, increasing power demands, and pressure on raw materials. Timing will be crucial, particularly regarding contract terms. Monitoring regional electric vehicle trade data, energy imports, and battery module shipments will help anticipate short-term challenges and opportunities. Trading strategies that focus solely on static views of oil or refined products may struggle unless they also consider changes in consumption patterns and supply issues in related sectors. Create your live VT Markets account and start trading now.Commerzbank analyst notes that China’s refineries increased inventories due to recent low oil prices
China’s refineries are using the recent drop in oil prices to increase their inventories. In April, crude oil imports stayed high, but processing fell to 58 million tonnes, or 14.1 million barrels per day. This is lower than March and down 1.4% from last year.
Refinery capacity utilization fell to its lowest point since 2022, dropping to just under 74%, according to Sublime China. Despite domestic oil production being 1.5% higher than last year, crude oil inventories rose by nearly 2 million barrels per day in April.
Apparent Oil Demand and Market Concerns
When adjusted for net exports of refined products, China’s apparent oil demand in April was 5.5% lower than the previous year. This signals ongoing concerns in the world’s second-largest oil consumption market. What we see here is a clear shift in strategy from Chinese refineries, focusing on stockpiling when global prices dip rather than increasing production. This cautious approach suggests they are preparing for future needs rather than reacting to current demands. Although import volumes remained high, processing activity decreased, indicating a disconnect between supply and actual consumption in the country. Utilization rates are now below 74%, at levels not seen since 2022. The rise in inventories by nearly 2 million barrels per day shows that storage is acting more as a buffer than a response to increased demand. Interestingly, refining output dropped even with a 1.5% rise in domestic crude production. This points to a lack of demand downstream rather than supply issues. For those closely monitoring demand metrics, April’s data shows a significant 5.5% year-on-year decline in apparent oil consumption (after adjusting for refined product exports). This suggests more than just a temporary lull and gives us a trend to consider for macro or options positions in the coming weeks.Shifts in Refinery Dynamics
Li from Sublime China emphasizes that utilization rates are structurally lower for now. Considering the already weak domestic growth outlook and uncertainties in industrial output, we can assume that operational decisions at Asia’s largest refiner are becoming proactive rather than reactive. This situation may also impact physical market dynamics. With more oil in storage, there’s likely to be less spot buying pressure, which could affect near-term pricing and potentially slow down price differentials. The flattening risk becomes more significant for calendar and time spreads. From a positioning perspective, it’s important to monitor refined product margins, especially for gasoil and gasoline. Reduced throughput could limit exports if demand continues to stagnate, affecting how much product reaches international markets. If this occurs, margins may strengthen later in the quarter, but only if domestic consumption remains low and inventory growth slows. We rely on short-to-medium term implied volatility measures, particularly for Asian products and related ETF exposures, to understand the potential impacts of these inventory increases. If market participants view the stockpiling as a defense against global instability, it may reduce price volatility in the short term. Conversely, if renewed risk aversion emerges from China’s industrial or consumer sectors, positions should be adjusted defensively. Traders should closely monitor June and July customs and throughput figures. These will clarify whether April was an outlier or if a trend reversal is underway. For now, storage appears to be influencing the market more than demand. Create your live VT Markets account and start trading now.The New Zealand dollar is expected to fluctuate between 0.5900 and 0.5950 against the US dollar.
The New Zealand Dollar (NZD) is predicted to fluctuate between 0.5900 and 0.5950 against the US Dollar (USD). Over the longer term, this currency pair is expected to shift within a tighter range of 0.5835 to 0.5985.
Recently, the NZD gained some upward momentum, reaching as high as 0.5932. However, this upward movement did not strengthen significantly. Therefore, we foresee continued range trading within the adjusted range of 0.5900 to 0.5950.
