US oil prices drop on signs of weak demand growth
Natural gas futures decline on forecast of weak heating demand
US
oil prices dropped last week on signs of weak demand growth and indications that key oil producers, particularly Saudi Arabia, have a limited appetite to cut output to bolster prices. On the New York Mercantile Exchange, crude oil settled at USD82.75 a barrel, falling by USD3.07. In London, Brent crude settled at USD86.16, the contract fell by USD4.05. NYMEX RBOB gasoline settled at USD2.2327 a gallon, for the week, the contract decreased by USD0.02. NYMX heating oil fell by USD0.06, settling at USD2.4976.
US oil production from the country’s fastest-growing shale basins is set to rise by some 0.11bpd in November from a month earlier, projections from the US Energy Information Administration (EIA) showed. Production from the Bakken formation will rise by some 0.03bpd to 1.19mnbpd, while Eagle Ford oil production will rise some 0.04bpd to 1.61mnbpd. Oil production from the Permian Basin of West Texas and New Mexico will see output grow 0.04bpd to 1.81mnbpd.
“Our production is 2.9mn to 3mn bpd, we didn’t reduce production, we are continuing at the same current output rate,” Hashem Hashem, chief executive of Kuwait Oil Co, said. “When it comes to developing the fields and raising production capacity, we are looking at the long-term. We will not be affected by such prices,” he added.
US crude inventories surged last week as refineries cut output, while gasoline and distillate stocks fell. Crude inventories rose by 8.9mn barrels in the last week, compared with analysts’ expectations for an increase of 2.8mn barrels, EIA data showed. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 716,000 barrels. Gasoline stocks fell by 4mn barrels, compared with analysts’ expectations in a Reuterís poll for a 1.2mn barrel drop. Distillate stockpiles, which include diesel and heating oil, fell by 1.5mn barrels, versus expectations for a 1.5mn barrels drop.
US
The Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose in early October to its highest level since July 2007. Economists polled by Reuters had expected the sentiment index to fall, but instead it ticked two tenths of a point higher to 86.4. Consumers were more upbeat about their personal finances and the national economy.
US retail sales declined in September even when factoring out weakness at auto dealers and gasoline stations. Total retail sales dropped 0.3 percent during the month. US retail sales declined in September even when factoring out weakness at auto dealers and gasoline stations, providing a surprisingly cautionary sign for the strength of consumer demand. Sales at clothing retailers dropped 1.2 percent and receipts at sporting goods shops edged 0.1 percent lower.
September data from the Fed shows that industrial production jumped 1.0 percent, well above the consensus for a 0.4 percent increase. August’s rate was revised down slightly, to -0.2 percent from -0.1 percent. Factory output saw a smaller beat, up 0.5 percent as against the consensus of +0.3 percent. The other half of the increase came from sizable rises in mining (+1.8 percent) and utilities (+3.9 percent) output. In YoY terms, industrial production moved up to +4.3 percent from +4.0 percent.
US housing starts and permits rose in September. Groundbreaking rose 6.3 percent to an annual 1.02mn unit pace. Economists polled by Reuters had forecast a slightly smaller gain. It suffered a setback last year when interest rates spiked, but rates have been falling lately. New housing starts for single-family homes rose 1.1 percent in September, while the more volatile multi-family homes segment jumped 16.7 percent. 15, 2000, and 23,000 less than the revised level of the previous week. Meanwhile, the four-week moving average edged down by 4,250 to 283,500 last week.
Europe
Euro-zone industrial production fell more than expected in August, mainly because of a slump in the output of capital goods that are used for investment. Eurostat said production in the 18 countries sharing the Euro fell 1.8 percent in August against July for a 1.9 percent YoY decline. Economists polled by Reuters had expected a 1.6 percent monthly fall and a -0.9 annual fall. Eurostat also revised down industrial output growth for July to 0.9 percent MoM from 1.0 percent and to 1.6 percent YoY from 2.2 percent. The main factor behind the fall was a 4.8 percent drop in the output of capital goods.
Euro-zone inflation slipped in September to its lowest level since October 2009 while the bloc’s exports faltered over the summer. Annual consumer inflation in the 18 countries sharing the Euro was 0.3 percent in September, with the pace of price rises slowing from August’s 0.4 percent reading. While the 0.3 percent reading was unchanged from Eurostat’s earlier flash estimate and was expected by economists, five countries including Italy suffered deflation in the month, underscoring the depressed state of household demand. The falling cost of energy was largely behind the drop in September, tumbling 2.3 percent on an annual basis.
Germany’s consumer price inflation for September was confirmed as unchanged MoM and up 0.8 percent YoY. The harmonized consumer price index was confirmed as unchanged MoM and up 0.8 percent YoY. Consumer prices excluding fuels and heating oil rose by 1.2 percent YoY. In August, consumer prices were unchanged on the month and rose by 0.8 percent on the year.
An index of German analyst and investor morale fell below zero for the first time in nearly two years in October. Mannheim-based think tank ZEW’s monthly survey of economic sentiment, tumbled for a tenth consecutive month to -3.6. That was the weakest reading since November 2012 and was much lower than the consensus forecast in a Reuterís poll for a positive scope to normalize policy sooner rather than later.
From a technical standpoint, gold tested and defended a key resistance level noted in last week’s update at $1243/44. This region is defined by the 38.2% retracement off the July high, the June close low and is the confluence of two pitchfork resistance lines. Although the broader outlook for gold remains weighted to the downside, we cannot rule out continued strength into the monthly close on
reading of 1.0.
Growth in employment in Britain was its slowest in more than a year in the three months to August even as the unemployment rate fell more than expected. Britain’s jobless rate fell to 6.0 percent between June and August, the lowest level since the three months to October 2008 and below a forecast of 6.1 percent in a Reuterís poll. But growth in employment eased to 46,000, its slowest pace since the March-May period of 2013. A fall in the number of people claiming unemployment benefit was the smallest since April last year, down 18,600 in September from August. Economists had expected a fall of 35,000. Average weekly earnings, including bonuses, rose by 0.7 percent in the three months to August, up slightly from 0.6 percent in the three months to July.
British inflation slowed sharply in September to its lowest level in five years. Consumer prices rose 1.2 percent on the year in September, compared with 1.5 percent in August as the prices of food and motor fuels both fell, the Office for National Statistics said. Economists taking part in a Reuterís poll had expected inflation to fall to 1.4 percent.
Japan
Japan’s industrial production fell more than previously reported in August. Output declined 1.9 percent MoM, compared with a previously estimated drop of 1.5 percent, after falling 0.4 percent in July. Industrial production contracted 3.3 percent YoY, which was also more than the initial estimate for a 2.9 percent decrease, after declining 0.4 percent YoY in July.
China
China’s exports totaled CNY1.315tn (USD214bn), up 15.2 percent from the same month last year, while imports of CNY1.125tn (USD183bn) were up 6.9 percent. Exports grew 9.4 percent in August while imports shrank for a second month in a row. September’s trade also improved on a sequential month basis with exports up 2.6 percent from August.
China’s annual consumer inflation slowed more than expected to 1.6 percent in September, a level not seen since January 2010. Analysts polled by Reuters had expected annual consumer inflation to ease to 1.7 percent in September from 2 percent in August. On a monthly basis, consumer inflation ran at 0.5 percent in September. That compared with 0.4 percent expected by economists.
India
India’s trade deficit widened to USD14.25bn in September following a jump in oil and gold imports, government data showed. The deficit stood at USD10.84bn in August. Merchandise imports surged nearly 26 percent last month YoY to USD43.2bn. Exports, meanwhile, grew a tepid 2.73 percent on year to USD28.9bn. account of the monthly opening range break which was validated this week. Bottom line: near-term the trade remains constructive while above $1222 with only a break sub-$1206 putting the bears back in control. A breach above $1244 eyes more significant resistance at $1260/63 and $1283 where ultimately we would start looking for favorable short entries.