Market Currents – August 7, 2015

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Ting ta-ta-ting-ting ting-TING! (this morning’s fanfare for Nonfarm Friday was played on Caribbean steel drums, in homage to the tropical month of August). The oil market is taking its cues from today’s official US employment report (no shock, there), hence as a relatively in-line report helps to edge open the door a little more for rate hikes in the coming months, the dollar strengthens and……….crude is on the defensive.

The headline number showed 215k jobs were created last month, just shy of the consensus of 225k, while an upward revison to last month’s number was seen (to 231K). The unemployment rate remains at 5.3%, while average weekly hours worked ticked up to 34.6 hours (a good thing; the last time it was above this was in January 2007).

We continue to see cracks appearing across both currencyland™ and commodityland™ as copper prices drop to a six-year low, while emerging market currencies get clobbered. The Malaysian ringgit and Indonesian rupiah are at their lowest since the late 1990s, while the Brazilian real drops to a 12-year low. Meanwhile, Chinese equities have rebounded as a further 2 trillion yuan is sought by the Chinese government to further prop up stocks.

We spoke here a couple a weeks ago about how BP is slashing expenditures, but this is not an isolated move. According to Rystad Energy, big oil has slashed spending this year by $180 billion  – the most since 1986:

oil investmentAs oil prices maintain their march below fifty dollardom, this week’s EIA inventory report has underscored the persistent strength coming through from refinery runs. While refinery utilization has consistently held above 90% since early April, refinery runs are at over 17 million barrels a day, the highest level since weekly data began in 1990.

refinery runs