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Saturday, 1 April 2017
Friday, 31 March 2017
Crude dips in Asia on profit-taking, rig count, Trump-Xi eyed
Crude oil dipped in Asia on profit taking after three days of gains and despite upbeat figures from China on manufacturing and services for March that gained more than expected in cautious trade as U.S. rig count data lies ahead and markets look to a meeting between President Donald Trump and China's Xi Jinping in Florida that is seen as high stakes on trade.
On the New York Mercantile Exchange crude futures for May delivery dipped 0.34% to $50.18 a barrel, while on London's Intercontinental Exchange, Brent eased 0.41% to $52.91 a barrel.
China's semi-official manufacturing PMI rose to 51.8, the China Federation of Logistics & Purchasing (CFLP) said Friday, beating the expected 51.6 level and releasing the figures one day ahead of the normal first of the month release and ahead of the Caixin PMI figures.
Earlier in Japan, household spending for February slumped 3.8% year-on-year, compared to a 1.7% decline seen. On a monthly basis however it rose 2.5%, beating the expected 0.4% rise.
Separately, national core CPI fell 0.2% for February year-on-year as expected, while unemployment dipped to 2.8% from 3.0%. Provisional industrial production for February rose 2.0% month-on-month, beating the expected 1.2% increase.
Market participants turn attention to Baker Hughes rig count, due to be released on Friday at 13:00 EDT. Data last weekrevealed that the number of active U.S. rigs drilling for oil rose by 21, the tenth weekly increase in a row. That brought the total count to 652, the most since September 2015.
The White House said Trump would host Xi next Thursday and Friday at his Mar-a-Lago retreat in Florida. It said Trump and his wife, Melania, would host Xi and his wife, Peng Liyuan, at a dinner next Thursday.
Overnight, crude futures settled higher on Thursday, amid optimism that an OPEC led production cut deal would be extended beyond June, following bullish comments from Kuwait oil chief Essam al-Marzouq.
Crude futures settled above the key $50-level, as crude prices hit a three-week high of $50.45, after Kuwait oil minister Essam al-Morzouq said his country was among several nations that supported the idea of extending the current deal between OPEC and non-OPEC members beyond June.
In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day (bpd) in an effort to combat the oversupply issue that has pressured prices over the last two years.
OPEC members have been high compliance with the deal to cut supply, which came into effect in January this year, while a ramp up in U.S. production of shale and crude has weighed on oil prices.
Despite, a dip in crude inventories on Wednesday, crude stockpiles remain at record highs – at over 520 million barrels, current crude supplies are up 6% over the past year. Rising U.S. crude stockpiles sparked concerns that OPEC may struggle to drain the glut in supply.
Thursday, 30 March 2017
U.S. natural gas futures stay lower after weekly storage data
U.S. natural gas futures declined on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. fell broadly in line with market expectations last week.
U.S. natural gas for May delivery shed 3.4 cents, or around 1.1%, to $3.197 per million British thermal units by 10:35AM ET (14:35GMT). Futures were at around $3.196 prior to the release of the supply data.
It settled higher for the second day in a row on Wednesday after touching its strongest January 31 at $3.253
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. declined by 43 billion cubic feet in the week ended March 24, compared to forecasts for a drop of 42 billion.
That compared with a withdrawal of 150 billion cubic feet in the preceding week, a decline of 25 billion a year earlier and a five-year average drop of 27 billion cubic feet.
Total natural gas in storage currently stands at 2.049 trillion cubic feet, according to the U.S. Energy Information Administration, 17.1% lower than levels at this time a year ago but 12.2% above the five-year average for this time of year.
Meanwhile, traders continued to monitor shifting early-spring weather forecasts. Weather systems will track across the country the next several days with rain, snow, and thunderstorms, but with limited cold air as they play out spring-like, according to forecasters at NatGasWeather.com.
There remains potential for a bit colder system from April 7 through the 10th and will be dependent on how a weather system tracking over the southern U.S. phases with a cold blast over the Midwest.
Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on early-spring demand.
The heating season from November through March is the peak demand period for U.S. gas consumption.
Nearly 50% of all U.S. households use gas for heating.
Dollar index struggles to hold 100 mark
The dollar index Thursday struggled to hold the 100 mark despite relatively upbeat U.S. economic data.
The dollar index was up 0.09% at 09:45 ET at 99.87 after a high of 100.09, it highest level since March 21.
U.S. Q4 GDP growth was revised up to 2.1% from an earlier reading of 1.9%.
Initial weekly jobless claims fell but by less than expected.
The dollar index was aided by a weaker euro, which fell 0.21% to $1.0742.
Reuters Wednesday reported the ECB does not intend to change its dovish guidance on monetary policy.
The pound was up 0.64% at $1.2515, recovering from lows posted on the U.K. triggering Brexit.
The dollar firmed 0.09% to 111.15 yen.
As Fed Speeches Dominate, Gold Heads South
This week, speeches of most of the FOMC’s twelve members were scheduled to take place . What can we learn from them?
The current week is dominated by the next round of Fed officials’ speeches. Although some of the events – including Yellen’s speech on Thursday – are yet to come, let’s analyze what has already been said.
On Monday, Chicago Fed President Charles Evans noted that the economy’s performance might justify three hikes this year, but the Fed might raise interest rates four times, if the economy really takes off (or just twice, if uncertainty increases).
On the same day, Dallas Fed President Robert Kaplan said that he would back more interest rate increases as long as the economy saw gains.
On Tuesday, Kansas Fed President Esther George pointed out that she needed more details on the Trump administration's fiscal proposals to factor them into her economic forecasts, while the Fed Vice Chairman Stanley Fischer told reporters that the FOMC’s median estimate for three hikes this year seemed about right.
On balance, the presented remarks did not bring anything new, as the Fed’s officials reiterated that inflation is on the way to reach Fed’s target, but that many uncertainties remain. However, they reminded investors of rate hike plans. Indeed, the market odds of a June hike increased from 49.6 to 54 percent. The recent economic data could also reinforce the rate hike expectations, as new orders for durable goods increased 1.7 percent in February, while consumer confidence surged in March to a 27-year high. This is why the US Dollar Index edged up yesterday, while gold prices went south.
However, the uncertainty about Trump’s policy seems to provide support for the yellow metal. Investors should remember that consumer and business confidence is not hard data, but subjective opinions – for example, confidence was high before the financial crisis. Another example: Markit Flash U.S. Composite PMI Output Index declined from 54.1 in February to 53.2 in March, signaling the slowest expansion of private sector output since September 2016. It seems that the confidence is high due to the elevated expectations about Trump’s economic agenda. Although the new administration is determined to fulfill its promises, the failure of Trumpcare signals that it will not go as smoothly as expected.
Anyway, there are still a few Fed speeches left – and they can affect the gold market. Stay tuned!
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
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