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Saudi's Exports Cut Merely A Trick Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Tue Oct 10 17 22:43 ET

US dollar fell across the board as uncertainty has increased of whether GOP Senator Bob Corker would vote for plan after the dispute with President Donald Trump. One vote matters a lot with the narrow Republican Senate majority. European currencies were better performer, with EURUSD and GBPUSD gaining +0.67% and +0.66%, respectively, and USDCHF dropping -0.55%. Political risks eased a bit as Catalonia postpones declaration of independence and seeks negotiation with the Spanish government. Treasury yields slipped from multi-year low, ahead of new auction. US Treasury would sell US$56B in new coupon-bearing supply this week, including US$24B in 3-year notes and US$20B in 10-year notes on Wednesday, and US$12B in 30-year bonds on Thursday. 2-year yields slipped -1 point to 1.51% while 10-year yields was down -2 points to 2.35%. In the commodity sector, crude oil expended gains for a second consecutive day. The front-month WTI crude oil contract settled above US 50/bbl again, gaining +2.7%. The Brent crude contract added +1.47%. The market was thrilled by the new reports that Saudi Arabia has cut November export allocations by 560K bpd and OPEC is persuading some independent US oil producers and hedge funds to join balancing demand/supply.

Catalonia Independence

Catalan President Carles Puigdemont in a speech announced that last week's referendum result has given the mandate for Catalonia to become an independent state in the form of a republic. Yet, he proposes "the suspension of the effects of the declaration of independence for a few weeks, to open a period of dialogue". The Spanish government apparently is not satisfied with this and interpreted the announcement as a declaration of "deferred independence".

Oil Market

After pledging over the weekend to take "extraordinary measures" to rebalance the market, OPEC General Secretary Mohammed Barkindo on Tuesday suggested that the US and the OPEC had agreed to find a joint solution on the matter. He urged the US to "take this shared responsibility with all seriousness it deserves". Sentiment was lifted by the headline what Saudi Arabia, OPEC's largest producer, has cut exports to 7.2M bpd in November. However, the cut is rather tricky. Although it represents a decline when compared with January's 7.8M bpd, it remains higher than September's exports of 6.7M bpd!

Dataflow

Only second-tiered data were released in the US. The NFIB Small Business Optimism Survey fell to 103 in September, from 105.2 a month ago. This marks the lowest reading since November last year. Looking into the details, six out of the nine survey districts reported weaker job creation. In Canada, housing starts declined -8.8K to 217.1K in September, while building permits fell -5.5% m/m in August.

Wednesday's focus is on the FOMC. The minutes for the September meeting would be released while Fed presidents Robert Kaplan, Charles Evans and John William are due to speak. At the September meeting, the Fed formally announced to begin balance sheet reduction in October, and affirmed that ther would be one more rate hike this year.
 

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