World Crude Oil Prices Remain “Murky”

$OIL, $USO

World Crude Oil prices declined on concerns over slowdown in China and other emerging markets.

Losses were contained as US inventory fell more than expected while distillate stockpile surprisingly dropped last week.

The front-month WTI Crude contract fell -2.95% while the Brent Crude contract dropped -2.71% on the day.

ECB President Mario Draghi indicated that it is too early to judge that recent global financial uncertainty would lead to a QE extension.

On Crude Oil inventory, the US DOE/EIA reported that total Crude Oil and petroleum products stocks fell -2.94 to 1297.68-M in the week ended on 11 September. Crude stockpile dropped -1.93-M to 453.97-M as inventory declined -2.97-M in PADD II and -2.54-M in PADD Vs Cushing, OK stock was down -0.46-M to 54.04-M. Utilization rate plunged -2.2% to 90.9%. Gasoline inventory rose +1.37-M to 218.76-M although demand increased +2.58% to 9.22-M BPD. Production added +3.22% to 9.55-M BPD, while imports plunged -30.19% to 0.50-M BPD. Distillate inventory plunged -2.09-M to 151.88-M as demand rose +24.12% to 4.32-M BPD. Production added +0.14% to 5.08-M BPD, while imports soared +148.5% to 0.16-M BPD during the week.

China’s economic outlook has stayed under the spotlight as more indicators are suggesting growth would slow more than previously anticipated.

Speaking in Seattle, WA at his 1st state visit to the US, Chinese President Xi Jinping defended that the country’s economy is working property. Xi suggested that “China’s economy will stay on a steady course with fairly fast growth. It is operating in a proper range with a growth rate of 7% … Our economy is under pressure but that is part of the path on the way toward growth”. Despite this, Atlanta Fed President Dennis Lockhart worried that China is “slowing to a still respectable pace of growth.”

Yet he added that “there is a decent chance that the world is overreacting to a slowdown there.” Regarding China’s growth prospect, ECB President Draghi suggested in his quarterly testimony to the European Parliament that “more time is needed to determine…whether the loss of growth momentum in emerging markets is of a temporary or permanent nature”. He affirmed that the ECB “would not hesitate to act”, should the downside risks to the inflation outlook materialize.

As China’s preliminary PMI fell to 6.5 years’ lower in September, similar indicators for other economies were mixed. Preliminary manufacturing PMI for the Eurozone fell -0.3 point to 52 in September, in line with expectations.

Country-wise, Germany’s manufacturing PMI dropped -0.8 point to 52.5 whilst that for France gained +2.1 points to 50.4 in September. Preliminary services PMI slipped -0.4 point to 54 in September, compared with expectations of 54.1. US’ preliminary manufacturing PMI stayed unchanged at 53 in September.

According to Markit, “manufacturing remained stuck in crawler gear in September, fighting an uphill battle against the stronger USD, slumping demand in many export markets and reduced capital spending, especially by the energy sector”.

Stay tuned…

HeffX-LTN

Paul Ebeling