OIL: Oil Prices Falling Ahead Of OPEC Meeting
Sep-30 22:19
With the OPEC meeting to decide November’s output target approaching, oil prices continued declining and finished September over a percent lower. The decision will be made on 5 October and it is expected to increase production by at least October’s 137kbd but according to an attendee a 500kbd will be considered.
- WTI fell 1.6% to $62.43/bbl on Wednesday to finish the month down 1.6%. It had traded within a $5 range during September with geopolitical risks offsetting surplus concerns. It is currently around $62.54.
- Brent was down 1.4% to $66.15/bbl to be 1.1% lower in September. It also traded in a fairly narrow range during the month with a high of $69.87 (September 26) and a low of $64.69 (September 5).
- While OPEC+ wants to increase market share, there is little material spare capacity amongst members, except Saudi Arabia. Therefore it is unclear if its plans to continue unwinding previous quota reductions will have a significant impact on supply. It remains a concern though given the IEA is forecasting a record surplus for 2026 and Bloomberg reported France’s TotalEnergies expects significant excess in Q1.
- Bloomberg reported a US crude stock drawdown of 3.7mn last week, according to people familiar with the API data. However, gasoline rose 1.3mn and distillate 3.0mn. The official EIA data is due on Wednesday.
- To add to supply concerns, US oil output exceeded 13.6mbd in July for the first time, according to Bloomberg.
- The market is currently focussed on oil output but the risk to Russian crude and refined products from Ukrainian strikes on its energy infrastructure persists. Russia renewed limitations on gasoline exports and introduced some for diesel as attacks have impacted refining and export facilities.
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NEW ZEALAND: A Light Week In NZ, Q2 Terms Of Trade Tuesday
Aug-31 22:17
- RBNZ chief economist Conway speaks to UBS clients at 1745 AEST on Thursday and will then moderate a panel on monetary-fiscal interactions in policymaking at the RBA’s research conference on Friday. Notes will not be published for either event.
- This week Q2 terms of trade data, which includes trade volumes, are released on Tuesday and expected to rise 1.9% q/q. Q2 building volumes are on Thursday, which are forecast to fall 1.0% q/q after being flat in Q1. Q2 GDP is not until 18 September.
- August Cotality home values are released on Wednesday night NZ time. The housing market has struggled and values fell 0.2% m/m in July, the fourth straight monthly decline.
- ANZ commodity prices for August print on Wednesday. They fell 1.8% m/m in July after -2.4% m/m in June.
US TSYS: Long-End Yields Bounce Friday, US Holiday Today
Aug-31 22:12
TYU5 reopens at 112-14+, down 0-01+ from closing levels in today’s Asia-Pac session.
- Friday night the US 10-year yield had a range of 4.2052% - 4.2401%, closing around 4.23%.
- Treasury yields ended mixed Friday night; the long-end moved higher and this saw the yield curve steepen (2s10s +3.94 at 60.965, 5s30s +4.67 at 122.993).
- MNI BRIEF: Fed's Daly Says Soon Time To Recalibrate Policy. San Francisco Fed President Mary Daly said Friday the time is coming for the Federal Reserve to reduce interest rates in order to prevent further damage to a weakening job market. "It will soon be time to recalibrate policy to better match our economy," she wrote in a LinkedIn post. "Congress has given the Fed two goals: full employment and price stability. Both are in tension at the moment, with tariffs pushing inflation higher and the labor market showing signs of slowing."
- Bloomberg: Trump’s Global Tariffs Found Illegal by US Appeals Court - Most of President Donald Trump’s global tariffs were ruled illegal by a US appeals court that found he exceeded his authority in imposing them. A panel of judges in Washington on Friday upheld an earlier ruling by the Court of International Trade that Trump wrongfully invoked an emergency law to issue the tariffs.
- 10-Year Yields continue to find supply toward the 4.20% area. While the 4.35% area holds, bounces should still see demand. First target is the recent lows around 4.18% then the bottom of the range towards 4.10% comes back into focus.
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
BONDS: NZGBS: Yields Steady To Start The Week, Building Permits Due
Aug-31 22:09
NZGB yields are little changed in the first part of Monday dealings. Aggregate moves are close to unchanged at this stage. The 2yr was last close to 2.95%, while the 10yr was near 4.34%. Both benchmarks finished lower for last week, with 2yr yields off by slightly more than the 10yr. NZ 2yr swap rates are a touch above recent lows, last around 2.73%.
- In the US on Friday, there was a Late bounce in Tsy futures on SF Fed Daly comment on LinkedIn: that "it will soon be time to recalibrate policy". Still, the 10yr yield remained above 4.20%, while front end yields finished down a touch (2yr to 3.62%).
- Late on Friday, NZ time, RBNZ Chair Quiqley announced his resignation. Finance Minister Willis stated: "Speaking to RNZ shortly after, Willis said Quigley tendered his resignation following a discussion with her earlier on Friday about the "ongoing criticism" of the board's handling of information surrounding Orr's departure on 5 March." (via BBG). PM Luxon also backed the move.
- "New Zealand Buyers Less Confident Of House Prices Rising: ABS" (via BBG, see this link).
- On the data front today, we have July building permits out in a little while. This week sees terms of trade for Q2 out tomorrow, then ANZ commodity prices for August on Wednesday. Q2 volume of building work done is out on Thursday. Note though Q2 GDP is not due until Sep 18.
