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Crude oil burns bright for 3rd straight month

 

Friday, September 01, 2023

Today’s headlines

What’s happening: Oil prices closed higher on Thursday, amid prospects of tight crude supplies.

What happened: Saudi Arabia is widely expected to extend its production cut of 1 million barrel per day into October.

Both WTI and Brent crude rose for the sixth consecutive session on Thursday, closing in the green in August, the third straight month of gains.

Why it matters: Saudi Arabia voluntarily lowered its output by 1 million barrels per day starting July, which had been lending support to oil prices.

However, China’s economic woes have fuelled concerns around weak demand from the world’s largest crude importer. The latest PMI data showed China’s manufacturing sector shrinking for the fifth straight month in August.

With concerns around China dampening oil prices, Saudi Arabia is now widely expected to extend its output cuts of 1 million barrels per day through October. Russia has also agreed with its OPEC+ partners to slash oil export and will announce the details of the deal next week.

On Wednesday, the EIA (Energy Information Administration) reported a decline in US commercial crude inventories of 10.6 million barrels in the week ended August 25.

WTI crude oil for October delivery gained $2, or around 2.5%, to close at $83.63 per barrel on the NYMEX (New York Mercantile Exchange) on Thursday, with prices for the front-month contract adding 2.2% in August.

October Brent crude rose by $1, or 1.2%, to settle at $86.86 per barrel on ICE Futures Europe, while the active November contract climbed $1.59, or 1.9%, to close at $86.83 per barrel. The front-month contract for the global benchmark added 1.5% last month, recording gains for the third month in a row.

In other energy trading, September gasoline fell 1.5% to $2.77 a gallon, losing around 5.6% in August. September heating oil gained 1.5% to $3.14 a gallon on Thursday, adding around 5.1% last month. October natural gas fell 1% to close at $2.77 per million British thermal units, adding around 5.1% for the month.

What to watch: Investors will continue monitoring the overall economic condition in China.

Traders also await the release of the Baker Hughes crude oil rigs data from the US today. Crude oil rigs in the US fell to 512 in the week of August 25, from 520 in the prior week.

The markets today

The US dollar will be in focus today ahead of the much-awaited jobs data

Context: The US dollar rose on Thursday and ended August with gains, as traders assessed various economic reports.

Details: US consumer spending rose the most in six months in July, but slowing inflation increased prospects of the US Federal Reserve keeping interest rates unchanged in September.

The personal consumption expenditures price index rose 0.2% last month, in-line with June’s rise. The number of persons filing for unemployment benefits in the US declined by 4,000 to 228,000 in the week ending August 26, versus market views of 235,000.

The recent data came after a report showed job openings had declined to its lowest level in around 2.5 years, fanning concerns around a slowdown in the US economy.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.5% to 103.62 on Thursday. However, the index is still below the 104.44 level recorded last Friday, which was the highest since June 1. The index added around 1.7% last month.

The EUR/USD forex pair fell around 0.7% to 1.0844 on Thursday, shedding about 1.4% in August.

What to watch: Traders await the release of economic data on nonfarm payrolls and manufacturing PMI from the US today. The US economy, which added 187,000 jobs in July, is expected to create 180,000 jobs in August. Analysts expect the unemployment rate to remain unchanged at 3.5% in August.

Average hourly earnings are projected to rise by 0.40% in July. Analysts expect the ISM Manufacturing PMI to improve to 47 in August, from 46.4 in July.

Other Markets: European indices closed mostly lower on Thursday, with the FTSE 100, France’s CAC 40 and STOXX Europe 600 Index down by 0.46%, 0.65% and 0.20%, respectively, and Germany’s DAX 40 up by 0.35%.

The news shaping the markets

The UN Secretary General Antonio Guterres said he does not see peace in Ukraine in the immediate future. Despite this, the safe-haven US dollar index fell slightly this morning.


South Korea unexpectedly reported a trade surplus of $0.87 billion in August, versus a year-ago deficit of $9.39 billion in the year-ago month, which lent support to the KRW/USD forex pair.


Australia’s Judo Bank manufacturing PMI came in unchanged at 49.6 in August, which sent the AUD/USD pair lower in forex trading this morning.


Ireland’s AIB manufacturing PMI rose to 50.8 in August, from 47.0 in the prior month, lending support to the EUR/USD forex pair.


Malaysia’s S&P Global manufacturing PMI was unchanged at 47.8 in August, sending the MYR/USD pair slightly higher in forex trading this morning.

What else to watch today

India’s manufacturing PMI and foreign exchange reserves, Russia’s manufacturing PMI, UK’s Nationwide housing prices and manufacturing PMI, Australia’s commodity prices, France’s government budget value, sales of new cars and manufacturing PMI, Spain’s tourist arrivals, consumer confidence indicator, total vehicle sales and Manufacturing PMI, Türkiye manufacturing PMI, Italy’s manufacturing PMI, Producer price inflation and gross domestic product, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, South Africa’s manufacturing PMI and total vehicle sales, Mexico’s foreign exchange reserves, manufacturing PMI and business confidence indicator, Brazil’s GDP Growth rate, balance of trade and manufacturing PMI, Canada’s GDP growth rate and manufacturing PMI, Singapore’s manufacturing PMI, US S&P Global manufacturing PMI and construction spending, as well as Indonesia’s tourist arrivals and core consumer prices.


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