Oil Market Outlook
Crude prices suffered losses last week on concern over Chinese manufacturers continued cuts in production and staff number, weaker-than-expected US economic data and Hurricane Joaquin veering away from oil installations in the US east coast. However, the losses were limited by the drop in the dollar on concerns that the US economy may still be too weak to allow the Federal Reserve to raise interest rates this year. The fifth weekly decline in the US oil rig count and rebounding US stock market also helped to pare losses.
Last week WTI prices fell by 16 US cents per barrel, closing at US$45.54 per barrel. Brent fell by 47 cents per barrel, closing at US$48.13. Dubai crude oil prices averaged at US$46 per barrel. Thaioil forecasts the price of WTI this week will move within the range of US$43-48 per barrel, while the price of Brent will move between US$46-52 per barrel.
Prices will continue to seesaw this week. Threats come from not just China’s slowing factory output but also of the drop in sentiment of Japan’s big manufacturers, and the diminished threat by Hurricane Joaquin. However, crude prices may be supported by the unrest in the Middle, the lower US rig counts as energy companies last week cut the number of rigs drilling for oil by 26, the biggest number of rigs idled in a week since April, according to a survey by oil services company Baker Hughes. Among the factors likely to affect trade this week:
Fears that Hurricane Joaquin have subsided after forecasters said it pass well offshore of the US east coast, which means oil facilities, and production, will not be hit.
The Bank of Japan’s tankan survey showed that confidence of big manufacturers had dropped to +12 from +15 in Q2. However, the confidence index of the non-manufacturing sector has risen to +25 from +23 in the previous quarter, and +20 higher point than previously forecast. According to the report, big firms in all sectors plan to boost capital expenditure by 10.9% more in the fiscal year ending March 2016.
Caixin services PMI fell to 50.5 in September, a 14-month low, from 51.5 in August while the final manufacturing PMI dropped to 47.2 from 47.3 in August, the weakest figure since March 2009. China’s National Bureau of Statistics (NBS) showed that NBS PMI in September fell to 49.8, a fall from 49.7 in the previous month, reflecting a slight improvement of China’s manufacturing sector. Levels below 50 signify a contraction of China’s factory sector.
Russia has launched air strikes against Islamic State (IS) and also US-backed rebel militants in Syria. IS has seized major economic areas and oil wells in Iraq and Syria.
EIA predicts that US oil production next year will fall by 400,000 barrels per day to 8.96 million b/d.
Economic indicators to watch are euro zone Markit Services PMI, US ISM non-manufacturing PMI, euro zone retail sales, Japan machinery orders, and US initial jobless claims.