OIL: Crude Down Thursday, Watching Upcoming Trump-Xi Meeting
Oil prices were moderately higher Wednesday helped by the EIA reporting large US crude and product inventory drawdowns for last week suggesting demand remains solid. They looked through the hawkish Fed cut and stronger US dollar (BBDXY +0.3%) but are lower Thursday possibly on demand concerns from less Fed easing. The market will be monitoring today’s meeting between Presidents Trump and Xi and the details of any agreed trade deal. Sunday’s OPEC meeting also remains a watch point with another 137kbd output increase expected.
- WTI rose 0.4% to $60.36/bbl after reaching $61.02, below resistance at $62.59. It fell to $59.70 early in the European session, just above support at $59.64. It is currently lower at $60.19. The benchmark remains almost 8% above the 20 October low at $55.96 but still looks likely to post another monthly decline in October.
- Brent was up 0.8% to $64.90/bbl to be down 1.7% this month. It fell to $63.92, holding just above support at $63.86, before rising to $65.37, below resistance at $66.78, 24 October high. Technicals still suggest there’s a short-term corrective bull cycle. Brent is 8% above the $60.07 20 October low. The announcement of further US & EU sanctions on Russia drove the rally.
- Last week EIA-reported US crude inventories fell 6.86mn barrels, the second straight weekly decline. The level has been moving in a range since July though. Both gasoline and distillate stocks fell for the fourth consecutive week down 5.9mn and 3.4mn respectively. Refining utilisation was down 2pp to 86.6%, 2.5pp below the same time last year.
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MNI: MNI JAPAN AUG FACTORY OUTPUT -1.2% M/M; JULY -1.2%
- MNI JAPAN AUG FACTORY OUTPUT -1.2% M/M; JULY -1.2%
- JAPAN AUG FACTORY OUTPUT POSTS 2ND STRAIGHT M/M DROP
MNI: MNI JAPAN AUG RETAIL SALES +1.1% Y/Y; JULY +0.4%
- MNI JAPAN AUG RETAIL SALES +1.1% Y/Y; JULY +0.4%
- JAPAN AUG RETAIL SALES -1.1% M/M; JULY -1.6%
JGBS: Futures Slightly Firmer Overnight, BOJ SOO Due
In post-Tokyo trade, JGB futures closed slightly stronger, +3 compared to settlement levels, after US tsys finished Monday's session 2-5bps stronger, with a flatter curve.
- US Government shutdown concerns buoy Tsys into the close. The BLS' key economic releases would be postponed in the event of a government shutdown, per the Department of Labor's plan for such an event.
- Fed Musalem said the Fed must be cautious cutting interest rates further because inflation remains too high, Fed Williams: policy decisions on a meeting-by-meeting basis, adding that this month's rate cut made sense given rising risks to employment, and leaves monetary policy at still-restrictive levels.
- MNI: Japan Govt Keeps Economic View; Ups Spending, Capex. Japan's government slightly tweaked its economic assessment in September, upgrading views on private consumption and capital investment for the first time in over a year, though leaving its overall judgment largely unchanged, the Cabinet Office said Monday.
- MNI INTERVIEW: BOJ Decisions Inconsistent - Ex-BOJ's Yamamoto. Markets are watching Bank of Japan communications more closely than economic data for signals on policy moves, with board decisions seen as inconsistent and driven by convenience rather than fundamentals, former BOJ Executive Director Kenzo Yamamoto told MNI.
- Today, the local calendar will see BOJ Summary of Opinions (Sept. MPM), Industrial Production, Retail Sales and Housing Starts.
