Hurricane Harvey may impact crude oil prices
By Yann Quelenn
The U.S Energy Department has released US inventories data which shows a decline of 5.932 million barrels during the week ending August 25. It is the ninth consecutive week of decline with crude oil losing 1% and now challenging its six-week low.
The tropical storm Harvey is ravaging Houston and some US refineries in the area are now temporarily closed. Yet, markets are clearly not fearing any potential scarcities within the short-term. Indeed, crude oil is typical quite easy to replace. We think it will take shortages lasting longer than a week or ten days to drive crude oil prices higher. For the time being, this natural disaster is not particularly weighing on prices.
The trend in the US rig count is bearish due to sustainable low prices. Now markets will start pricing in the next OPEC meeting late November. We do not predict that any production cut will be applied. The market share war will continue and the roadmap spells no relief the US refinery industry.
We maintain that the upside pressures on oil are likely. In particular, there is a seasonal effect that is back. In September, the demand for crude oil is likely to decrease, marking the end of the summer season, and overproducing oil is definitely not a viable long-term project.
USD buoyed amid upside surprise in growth data
By Arnaud Masset
The US dollar received a much-needed, fresh boost yesterday amid the release of better-than-expected data from the world’s largest economy. First, the second print on the Q2 GDP was revised to 3% q/q (annualized) from the 2.6% first estimate, amid a substantial upside revision to customer spending and a stronger business investment. Personal consumption edged up to 3.3% q/q (annualized) from 3%.
In the jobs market, the employment report released by ADP saw a sharp rise in August payrolls. US companies added 237,000 jobs in the month (versus 189,000 estimated), while the previous month’s reading was upwardly revised to 201,000 from 178,000. It does bode well for Friday’s NFPs!
The greenback extended gains against all G10 currencies yesterday. The worst performer was the New Zealand dollar that fell 1.35% with NZD/USD on its way to test its 200-day moving average that currently stands at $0.7130. The Canadian dollar also suffered a small sell-off with USD/CAD climbing as high as 1.2663.
The show will go on today as a fresh batch of key data is due for release. Personal income and spending, which are both expected to have improved in July (+0.3% m/m and +0.4% m/m respectively) will be published this afternoon. Then the Fed’s favorite measure of inflation, core personal consumption expenditures, should show a further easing in July as economists expect a reading of 1.4% y/y. Finally, July’s NFPs (180 000 expected and 205 000 previous), together with the complete jobs report, will be published on Friday.