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Oil Plunged on Production Growth in Nigeria and Libya Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Thu Jun 01 17 00:25 ET

Crude oil price slumped on concerns over supply glut. A Reuters survey indicated that OPEC production rose in May, as Nigeria and Libya raised output. These two countries are exempted from the output cut deal. It was estimated that Libya production rose to a fresh 3-year high of 0.83M bpd last month. The front-month WTI crude oil contract plunged to a 3-week low of 47.73 before settling at 48.32, down -2.7%, while the Brent contract slumped to 50.31 at close, down -2.95%. In equity markets, Wall Street weakened as financial shares plunged after J.P. Morgan Chase and Bank of America reported a decline in 2Q17 revenues. The DJIA and S&P 500 indices slipped -0.1% and -0.05% respectively. US dollar remained under pressure, as weighed down by political uncertainty and the delay of implementation of Donald Trump's pro-growth policy. The DXY index ended the month at the 6-month low of 96.92, down -2.76%. Basically, the US dollar has erased the gains made after Donald Trump's victory.

The selloff of crude oil prices was contained by the API inventory report which showed the biggest decline in crude inventory this year. The industry-sponsored agency estimated that US crude oil inventory declined -8.7 mmb in the week ended May 26. For refined oil products, gasoline stockpiles dropped -1.7 mmb, while distillate increased +0.12 mmb. The Doe/EIA today will probably report a -2.52 mmb fall in crude oil inventory. Gasoline and distillate stockpile might have dropped -1.09 mmb and +0.76 mmb respectively. Meanwhile, natural gas storage probably incrase +78 bcf for the week.

On the macroeconomic developments, US' Beige Book suggested that most of the twelve Fed Districts reported a continued expansion in activity "at a modest or moderate pace", although Boston, Chicago and New York indicated some degrees of slowdown. Labour markets continued to tighten, with most Districts reporting shortages in a wide range of jobs. Despite continuing improvement in the employment condition, wage growth remained "modest to moderate". Overall, pricing pressures were reported to be little changed from the last report, with most Districts reporting "modest" increases. Separately, the Chicago PMI added +1.1 points to 59.4 in May, the highest since November 2014. This might be indicative to the ISM manufacturing index due today. Pending home sales dropped -1.3% m/m in April and were down 5.4% from the same period last year.

In the Eurozone, headline CPI moderated to +1.4% y/y in May, missing consensus of +1.5% and April's +1.9%. The core reading also slowed to +0.9% m/m, from +1.2% in April. The market had anticipated a milder moderation to +1%.

Today, the US ISM manufacturing index probably sliped -0.2 poin to 54.6 in May. On the job market, the ADP employment figure probably shows an increase of +181K in May , from 177K a month ago. Initial jobless claims might have risen to 238K in the week ended May 27, from 234 K a week ago. Eurozone's final reading of manufacturing reading might have stayed unchanged at 87 in May. In the UK, the manufacturing PMI probably slipped -0.8 point to 56.5 in May.

 

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