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Fed Signaled to Reduce Balance Sheet Soon Despite Weak Inflation Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Wed Jul 26 17 23:07 ET
US dollar extended recent weakness after the FOMC meeting announcement. The Fed left it monetary policy unchanged, maintaining the Fed funds rate target at 1-1.25%. Two new developments were: 1) the Fed noted that balance sheet reduction would begin "relatively soon"...
Oil Prices Jumped as US Explorers Cut Capex, Helping Limit Output Growth Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Tue Jul 25 17 22:48 ET
Oil prices rallied on hopes that output surplus would come under control. The front-month WTI crude oil contract jumped to a 8-week high of 48.66 before settling at 47.89, up 3.35%. The Brent contract rose above 50 for the first time since June and closed at 50.2, up +3.29%. The market was thrilled as Anadarko Petroleum signaled that it would cut capital spending plans while Saudi Arabia pledged to reduce exports.
Crude Oil Recovers as Saudi Arabia Promised to Cut Exports in August Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Mon Jul 24 17 23:10 ET

Crude oil prices recovered in an otherwise quiet market, driven by the OPEC's pledge to cut exports in August. UAE energy minister Suhail Al Mazrouei noted that the members might discuss further extension of the output cuts in November. The front-month WTI crude oil contract climbed higher to 46.53 before ending the day at 46.34, up +1.25%, while the Brent contract gained +1.12% to close at 48.6 for the day.

Saudi Arabia's oil minister Khalid Al-Falih announced that it would cap its exports at 6.6M bpd in August, 1M bpd below that the same period last year. He acknowledged that "the market has turned bearish with several key factors driving these sentiments", admitting that weaker compliance with cuts by some OPEC states and a rise in OPEC exports were one of the factors leading to weaker oil prices. He added that "some countries continue to lag which is a concern we must address head on" and "exports have now become the key matrix to financial markets and we need to find a way to reconcile credible exports data with production data". On the global oil demand outlook, Falih expect growth would reach +1.4- 1.6M bpd in 2018, a rate that should offset US output expansion.

For Nigeria and Libya, the two OPEC members that are exempted from the output cut deal, the former has agreed to cap or even reduce its supply if it can maintain output of 1.8M bpd a day, while the latter might begin capping production when it hits 1.25M bpd. Recall that OPEC has agreed with come non-OPEC producers led by Russia to cut oil output by a combined 1.8M bpd from January 2017 until the end of March 2018. Nigeria and Libya were exempted from the cut as they struggle to recover the oil industries after years of civil war and militant attacks.

As we have emphasized for long, the key driver for the oversupply is US shale boom. Dave Lesar, Executive Chairman of Halliburton, the world's top fracking-services provider, has recently suggested that "rig count growth is showing signs of plateauing and customers are tapping the brakes". Baker Hughes reported that the number US oil rigs dropped -1 unit to 764 in the week ended July 21, marking the second decline in four weeks.

On the dataflow, US flash Markit manufacturing PMI added +1.2 points to 53.2 in July, highest since March, and the services PMI steadied at 54.2. The composite PMI climbed + 0.3 point to 54.2, highest since January. Separately, existing home sales dropped -1.8% m/m in July. The reading only climbed +0.7% from the same period last year. In the Eurozone, the flash Markit manufacturing PMI slid -0.6 points to 56.8 in July, and the flash services PMI steadied at 55.4. Note that Germany's manufacturing PMI dropped quite a bit, by -1.3 points, to 58.3 for the month. Despite this, the reading remained the highest in 6 years.

Today, US consumer confidence index probably fell -2.9 points to 116 in July. In the Eurozone, Germany's IFO business index might have dipped -0.2 point to 114.9 in July. The expectations and current assessment indices probably softened to 106.5 and 123.8, respectively, from 106.8 and 124.1 in June.

US Political Drama Prolongs Greenback's Weakness Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Mon Jul 24 17 01:22 ET
Narrowing yield differentials between US bonds and those of other major economies are prolonging USD's weakness. The Fed increased interest rates twice this year, in March and in June, and the dot plot accompanying the June meeting statement continued to project one more rate hike for the rest of the year, followed by three rate hikes in 2018.
Weekly Fundamentals - Ecuador Opening the Way for More OPEC Members to Break Promise? Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Sun Jul 23 17 00:14 ET
Despite US report of oil inventory decline and the weakness in US dollar, crude oil prices ended the week in red. Ahead of the meeting of the Joint Ministerial Monitoring Committee in St. Petersburg, Russia, on Monday, the market was unsettled by Ecuador's announcement that it would produce more than its quota.
Euro Rose Across the Board as Draghi Signaled to Discuss QE Adjustment in Autumn Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Fri Jul 21 17 02:09 ET
The euro was undoubtedly the best performer after the ECB press conference. ECB left policy rates and the QE program unchanged in July, and maintained the forward guidance of potential extension/expansion of asset purchases, if needed, in the accompanying statement.
US Oil Inventory Fell Last Week. ECB, BOJ Under Spotlight Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Wed Jul 19 17 23:01 ET
Crude oil climbed higher as EIA reported a bigger-than-expected decline in US inventory. The front-month WTI crude oil contract added +1.55% while the Brent contract was up +1.76% for the day. The DOE/EIA reported that total crude oil and petroleum products stocks declined -10.18 mmb to 1325 mmb in the week ended July 14.
Ecuador Said it would Raise Output above Quota Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Tue Jul 18 17 22:42 ET
Crude oil price climbed higher on signs of improved demand in China. Yet, gains were limited by Ecuador's announcement that it would no longer comply its output quota due to budget difficulties. The front-month WTI contract initially ose to a 3-week high of46.92 before settling at 46.4, up +0.83%.
EIA Forecast US Shale Output to Rise Further; Aussie Rallied on Rate Hike Hopes Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Tue Jul 18 17 01:25 ET
Crude oil benchmarks continue hovering between US$45-50/bbl, as traders were torn between further increase in US shale oil output and hopes of deeper production cut as OPEC/non-OPEC countries meet on June 24. In the latest drilling report, the EIA forecast that US shale oil production would rise for the eighth consecutive month, up +0.11M bpd to 5.59M bpd in August.
China's GDP Growth Stayed at +6.9% in 2Q17, On Track to Reach 2017 Target Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Mon Jul 17 17 00:22 ET
China's macroeconomic data for 2Q17 surprised to the upside. Released earlier in Asia session, China's GDP expanded +6.9% y/y in 2Q17, same pace as the prior quarter but above consensus of +6.8%. Economic activities in June continued to improve. Industrial production growth accelerated to +7.6% y/y in June, beating consensus of and May's +6.5%.
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