Market Currents – Karate Kid Edition
As Ralph Macchio celebrates his 54th birthday (make you feel old? me neither, ahem…), the crude complex has tried to kick higher ahead of the weekly inventory report, but is losing the fight against a stronger dollar. While we continue to slowly exit US maintenance season, builds to crude stocks are still underway. Last night’s API report yielded a +2.8 million barrel build, a little more than the consensus expected from today’s EIA report of +2.5 million. Draws are expected to the products again, while the potential for a third consecutive draw at Cushing is trying to provide some support for prices this morning.
Crude is also keeping an eye on supply disruptions in Brazil, where a labor strike by Petrobras workers is reducing production by the state-run oil producer by 8.5% (according to striking workers, it is much more). Meanwhile, oil shipments from the Zueitina port in Libya have been halted amid escalating tensions between the two ruling governments.
Onto the economic data front, and the Caixin Chinese Services PMI came in much better than expected, setting a more positive tone overnight for broader markets. This mood was somewhat endorsed by European Services data, which only missed consensus by the smallest of margins. Better-than-expected prints by Spain and France were offset by misses from Germany and Italy. For the combined manufacturing and services composite, the Eurozone saw a minor tick lower for last month, but a trend of ongoing stable growth is the key takeaway:
Across the pond, and Brazil’s woes continue. Industrial production dropped 1.3% in September on the prior month, now down -10.9% year-on-year. The only saving grace is that expectations were for worse prints than those seen. Onto the US, and the trade deficit narrowed to -$40.8 billion in September. As we know all too well, all paths lead back to energy, hence the narrowing in the deficit from August’s -$48.02 billion was driven by petroleum imports dropping to their lowest level since May 2004.
The thunder-stealer from official US unemployment data on Friday – the ADP report – has shown 182,000 jobs were created last month – pretty much in line with consensus. Endorsing expectations for a decent Nonfarm Friday was total vehicle sales, released yesterday afternoon. Sales hit a new multi-year high of 18.24 million (annualized), up from last month’s 18.17 million. Mo’ jobs = mo’ people buying cars:
Back to the crude complex, and despite fears of a torrid Q3 earnings season for the US oil and gas industry, we are hearing some US shale oil producers are revising up production forecasts, as efficiency gains are helping offset cost-cutting and lower oil prices. “We are delivering this incremental production growth with significantly lower costs” said Devon Energy’s CEO Dave Hager, while also confirming it will cut
About The Author
Matt is a Director of Commodity Research at ClipperData. Matt specializes in extracting key themes from technical and fundamental analysis of the global energy market, and communicating these through daily and weekly deliverables. He also provides oil and natural gas analysis and commentary to national and international media outlets that include CNBC, Fox Business, Russia 24, the Wall Street Journal, MarketWatch, AFP, Bloomberg, Reuters, and the Oil Daily. Prior to joining ClipperData, he worked for eight years at Schneider Electric / Summit Energy as a Global Commodity Analyst, where he also founded and authored the blog, Energy Burrito. He started his career at the Royal Bank of Canada in the UK, spending eight years with the bank. During that time, he managed $55 million in assets as a portfolio manager and financial analyst.