Daily market analysis by Broker Arena

US shale industry recovery weighs on prices, API estimate is in the limelight.

Crude futures extend losing streak declining to to two-month lows amid enduring fears global oversupply weighs down oil market.

US Oil futures for September delivery dropped 0.22% to 45.84/bbl., LSE traded Brent fell 0.30% to 46.82/bbl. On Monday crude prices tumbled 1.52% as Friday Baker Hughes report showed US drilling firms continue to ramp up crude output. According to the report the number of drilling rigs in the United States increased last week by 6 to 357, extending recovery for a third week.

Increasing drilling activity in the US fanned speculations production could increase in the coming weeks, reviving concern about an oversupply of commercial crude stockpiles in the country.
Brent futures curbed declines amid fading worries about supply disruptions in Turkey sea ports as coup attempt in the country failed.

Oil bidders are now focused on fresh weekly data on stockpiles of crude oil and petroleum products. The American Petroleum Institute is to release its weekly account on crude stockpiles today, while official EIA estimate is due on Wednesday. Official data is expected to show a cut by 2.3M barrels in US commercial crude inventories which can potentially help energy market to head for rebound in this week.

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[B]Upbeat EIA report help oil to bounce from two-month low, gasoline stocks in US saw biggest gain for five months.[/B]

US Oil stalls near $46 mark after staging rebound from $44.5 on positive crude inventories report released by EIA in Wednesday.
WTI futures for September delivery gained 0.35% consolidating below weekly resistance level of $46. Brent futures saw bidding activity rising 0.38% to 47.35 per barrel.
Prices tumbled to two-month low in Wednesday before rapid recovery due to higher than expected contraction of US Oil stockpiles and substantial increase in gasoline reserves.
EIA said in its weekly report commercial oil stocks in the country decreased to 2.342 million barrels during the week from 9 to 15 July. United States oil inventories now average 519.5 million barrels and are at historically high levels for this time of year. Investors expect stockpiles to decline by 2.1 million barrels with the American Petroleum Institute in Tuesday claiming reservers shrank by 2.3 million barrels. It is worth to note that US oil reserves have been declining for nine consecutive weeks signaling about resurgence of crude output in US.
Oil reserves in biggest storage of US, Cushing rose by 189K barrels although it was expected to shrink by 100K.
While gasoline stocks rose by 0.91 million barrels, distillate stocks declined slightly, by 0.21 million barrel. A week earlier, stockpiles of distillates in the country jumped more than 4.0 million barrels, which was the biggest growth in more than five months. Analysts had expected gasoline stocks to decline by 0.5 million barrels.
Meanwhile, the volume of oil production in the United States rose slightly by 9K to 8.494 million barrels per day. Oil production in the country is still more than 1 million barrels a day less than last summer, when it peaked at 9.604 million barrels per day, record high level for 44 years.

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Gold extends decline on appeal to risk assets, ECB hold the policy unchanged.

Gold futures slid on Friday as upbeat economic data from US released in Thursday supported greenback, while ECB left the door open for stimulus in future.On Thursday prices fell to three-week low at $1,314, recapturing $15 in New-York session. Downturn resumed on Friday though second attempt to break the support is likely to be reserved for next week.


Market sentiments started to heat as ECB President Mario Draghi said on Thursday that European markets have successfully coped with the volatility as a result of Brexit, showing “encouraging stability”, but reiterated that the Central Bank is ready to act, using all tools within mandate.The comments came after the ECB kept interest rate unchanged at a record low 0.0%, tallying with forecasts.

US Dollar gained support on positive employment figures posted in Thursday which boosted optimism about the U.S. economy.

The data showed that existing home sales in the United States unexpectedly rose in June by 1.1% to 5.57 million units, while a separate report showed that the number of aplications for unemployment benefit in the United States unexpectedly fell last week to 253000 (-1000). The USD index, showing how good greenback performs against the basket of other majors rose sharply by 0.23% to 97.16. Futures on US interest rate price in only 1.2% probability of rate hike on next meeting at Wednesday, July 27.

Gloomy UK Composite PMI released on Friday added pessimism to post-Brexit UK economic outlook. The headline figure at 47.7 missed median estimate of 48.5, signaling economic contraction could be faster than expected.

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[B]Crude prices sink on strong Dollar, traders wager on further drop[/B]

Oil prices have accelerated the slump during late London session renewing two-month low due to concerns about persisting market glut and lower demand of crude oil by refineries.The rig count according to Baker Hughes rose by 14 rigs to 371 signaling US Shale producers expand drilling activity for the 4th consecutive week, spurring worries additional supplies from US will worsen the glut.On Monday WTI fell 2.06% to 43.28 per barrel, Brent declined 1.71% to 45.30 level. Worries on global oversupply slashed 4% from Brent price last week and 3.8% from WTI futures.

Net position on Crude Oil has been declining consecutively ten weeks according to the CFTC and fell by 5.2K to 289.6K from 294.8K signaling traders continue to build wagers on the fall. $40 floor look appealing for traders though upbeat API and then EIA data may trigger the bounce as it was seen last week as traders are looking for growth drivers despite gloomy sentiments.

Greenback index hit 97.62 on Monday as employment, housing and PMI data points on a stable footing of US economy, fanning speculations FED may return to hawkish rhetorics. Later during Monday trading the index erased gains returning to 97.41, though showing no significant bearish interest to the currency. Traders will focus on Fed Statement on Thursday to understand if FED sees headwinds in Brexit for the growth of US or turns focus on domestic data.

We expect US Dollar to extend growth ahead of the FED event as recent data shows traders increase bets on rate hike in this year and wait for confirmation from the US policymakers.

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[B]Oil prices recoil ahead of API, Dollar sinks ahead of FED.[/B]

Crude saw modest rebound on Tuesday during the Asian trading session after bearish forecasts sent prices deeper on Monday and now investors are waiting for the estimate of oil reserves in the United States.

Today, the American Petroleum Institute (API) will release its weekly estimate of crude oil reserves and petroleum products in the United States. The report certainly won’t be passed unnoticed producing some good volatility on UK and US Oil benchmarks as traders are desperately looking for new catalysts for growth or downward breakout.
On the NYMEX WTI futures for September delivery rose 0.21% to $43.22 a barrel. On the ICE Futures Exchange Brent oil with settlement in October rose 0.29% to $45.26 a barrel.

Yesterday oil prices fell sharply to its lowest level in three months due to angst consumption fails to keep pace with supplies growth and strengthening of the greenback

At the weekend, analysts at Morgan Stanley have issued serious warnings about oversupply of oil products as gasoline stocks rose to the highest level in five years. Last week gasoline reserves increased by 0.91 million barrels, distillates stockpiles jumped by 4.1 million barrel what became the biggest increase in more than five months. Recent trends have heightened fears that refineries will reduce the pace of purchases of oil in the next few weeks, triggering a drop in oil prices.
“The demand for crude oil is lower than demand for petroleum products for the first time in three years — Morgan Stanley analysts wrote. -Refineries — real oil consumers, and oil demand is more important to balance the oil market than demand for petroleum products. Given the glut at the oil products market, reducing the margin of oil refineries and changes linked to economic cycles, we expect that the demand for crude oil will fall in the next few months.”

As a result, analysts predicted that demand for oil will increase by 625K barrels per day in 2016. It is much smaller than the International Energy Agency forecast of consumption growth by 1.3 million barrels per day. WTI oil rose from its lowest for 13 years of $26.05, which it touched in mid-February, partly due to signs that the imbalance between supply and demand began to decrease.

Investors were pricing in the news from Libya, where the Commander “Libya Petroleum Facilities Guard”, Ibrahim Dzadran said that the guard is ready to stop the prolonged blockade of three key ports of the North African country.

DXY declined 0.23% to 97.06 ahead of FED meeting in Wednesday as traders flee from US Dollar ahead of uncertainty related to FED comments toward further monetary policy. Pound tumbled 0.50% despite Dollar weakness as traders cut their exposure in risk assets.

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[B]Crude prices test new lows as EIA shocks with rising stockpiles, $40 is on the way[/B]

Oil prices fall on signs the market continue to drawn into supplies, with Brent falling below $43 per barrel, first time since 20 April.Brent futures traded on ICE exchange found support at $42.99 per barrel in Thursday trading.WTI also renewed bottom, falling to $ 41.77 per barrel.

Heavy bearish signal was produced by US Department of Energy reporting that oil reserves in the country rose by 1.67 million barrels last week, while gasoline reserves increased by 452K, hurting refineries. Analysts projected a decline in crude oil inventories by 2million barrels, gasoline – by 700K barrels.

[B]What rises most concerns is that gasoline reserves in the US are growing during the peak of summer driving season[/B] which is very unusual for this time of a year, given the fact that the consumption of fuel by motorists is at the highest level in decades.

Stockpiles at biggest US storage hub Cushing in Oklahoma rose to 65.2 million barrels. In addition, oil production in the US grew at the end of the third week in a row, to 8.52 million barrels per day.

Meanwhile, Goldman Sachs analysts point out that the main negative factor for the oil market is not excess fuel but strengthening of the US dollar. The US currency rises in expectations of further divergence in the direction of monetary policy between the United States and other major economies of the world. If the Fed, on the expectations of many experts, will raise its key interest rate until the end of the year, the central banks of Britain, Japan and the euro zone may soon also announce the expansion of stimulus measures.

Investors damped bidding on Dollar after FED stance regarding timeframe of rate hike remained unclear with growing bias for delay. USDX tumbled 1$ to 96.35, partly regaining its position during Thursday trading with uptick to 96.50. Sterling and Euro rose, while emerging market currencies fell.

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[B]BoJ holds off additional spur for the country, weak US GDP bodes ill for rate hike outlook.[/B]

Greenback tumbled to a fresh one-month low against majors as gloomy GDP figures erode outlook for US growth slashing chances FED will raise rates this year. Bank of Japan benights markets keeping the size of stimulus program unchanged resulting in a sharp upsurge of JPY and downward swing in local stocks.
USD/JPY fell 103.50 on the announcement of JPY policy rate with Yen growth accelerating after release of US GDP data, touching lower bound of 102.50 level.

Bank of Japan held policy rate unchanged at negative 10 b.p. while announcing an increase in the volume of purchases of securities exchange-traded funds (ETF), retained the goal of increasing the monetary base by 80 trillion yen per year, supporting plans to buy other assets.
Obviously, Kuroda doesn’t want to break off with other central bankers who took wait-and-see position, trying to delay easing as much as possible till potential Brexit fallout shows up. This could provide a respite for traders bidding on risk assets as short-term risk diminished, according to FED.
Although a new chapter of global risk-aversion can be opened by BoE decision in next week which is expected to boost stimulus and cut rates.
BoJ decision disappointed investors who had expected more decisive measures after the pledge of Prime Minister Shinzo Abe at the start of this week.

Greenback fell sharply as 2Q GDP growth slowed to 1.2% falling short of medium estimate of 2.5%. Personal consumption grew 4.2% in second quarter below forecast of 4.4%.
Crude oil prices extended declines, US Oil fell below $41 to 40.60 level on hedge funds building their bearish wagers, oversupply issues.

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Lackluster Mfg. PMI sends CSI 300 down, greenback is under pressure ahead of ISM

Chinese Manufacturing PMI fell in July to 49.9 points from 50 points a month earlier showed the data of China National Bureau of Statistics.

The indicator dropped below 50 points indicating decline in activity of the industrial sector first time in five months. Median estimate of the experts interviewed by WSJ projected an increase to 50.1 points.The reading below 50 mark indicates decrease in activity, while above 50 – expansion of the sector. Another similar index calculated by Caixin Media and Markit rose to 50.6 points in last month from 48.6 points in June.Local stock index CSI 300 fell on the data by 0.85% to 3,176.81 points.

Futures on US Dollar tumbled to a monthly low of 95.45 on Friday as lackluster GDP and Personal Consumption data dampened hopes for a rate liftoff this year. Yeat-to-Year US GDP for a second quarter rose by 1.2%, half of the median estimate at 2.5%, while the growth of Personal Consumption for the same period slackened to 4.2%, missing a forecast of 4.4%.


Despite eroded optimism on US growth, the Chairman of the Federal Reserve Bank (FRB) of San Francisco John Williams doesn’t anticipate a recession in the US economy after seven years of continuous growth.

“I’m not worried that recession risks may increase in the next year or in the future, because there are no signals that the US economy is going in this direction”, – he said, speaking in Boston.Asked about the possibility of the FED’s move to the policy of negative interest rates, he said he believes it is unlikely in the United States and expects the hike rather than the cutoff of Fed rates in the next few years.

According to Williams, the US economy is “doing well” and close to full employment with inflation around 1.5%, close to the target of 2%.”Currently, we are in a good position in recent years we have gone through a series of riots and still making progress.” – J.Wilyams said.

He noted that the statistical data on the US economy which will be posted in the coming months, could support both two rate hikes, one rate hike or none at all.”The flow of data, which we will see in the next couple of months, in my opinion, will be speaking in favor of the two rate increases in 2016. It may be true that this does not happen, and the data will support only one rate hike or none at all. Time will tell “- quoted J. Williams Bloomberg.

The statement of the Federal Open Market Committee (FOMC) following the meeting pointed out that the Fed is still open to consider raising rates in September.

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[B]US Dollar extends declines as growth on Wall Street stalls, Aussie gains prove RBA impact was limited[/B]

US Dollar tumbled to a six-week low against the basket of majors on Wednesday as markets continue see earthly chances of the FED raising rates this year. A downturn of the US currency extended after many of the Wall Street bulls withdrew from trading: local stocks demonstrated worst performance in this month because of lackluster economic data and falling oil prices.
US public spending rose, though investors were rather focused on weak inflation figures. Together with drop in business investments and weak GDP growth in the second quarter FED could give up an idea of rate hikes in this year.
Greenback futures hit the session low of 95.201, near a minimum of six weeks at 95.003 recorded at night. European common currency trades without sharp swings near 1.12 after rising 0.6% during the Asian session to $ 1.1233 - the highest since June referendum, where UK decided to break from the European Union. USD/JPY rose 0.32% to 101.20. The pair dropped 1.5% to three week low of 100.680 as the meeting of Minister of Finance Taro Aso and BoJ governor Haruhiko Kuroda spoiled expectations the policymakers will announce new plan to weaken the Yen. Comdolls advance on buck weakness, with AUD/USD soaring 1% during Asian trading. The pair hit a three-week peak of $ 0.7638, erasing declines despite RBA decision to lower cash rate by 25 b.p. to 1.5%
Oil traded near a 3.5-month lows, as global markets lapsed into risk-aversion mode. Oil prices failed to recover on API data which indicated crude inventories declined in the US as the pace of production outpaces the destocking. According to the API, crude oil inventories fell by 1.34 million barrels to 518.7 million in the week ended July 29 matching forecasts. Inventories at the Cushing storage Hub in Oklahoma fell by 1.30 million barrels, API data showed.

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[B]Pound holds near close ahead of BoE, UK Gilts yield drop[/B]

After holding off interest rate cut in July, the Bank of England is expected to venture out for monetary easing today, first time in 7 years in response to recession risks sparked after Britain’s vote to quit EU. The country’s interest rate which currently stays at 50 b.p. can be lowered to historical low of 25 b.p., predicts majority of market experts.

[B]The futures on BoE rate decision, which serve as a main indicator of market sentiments towards the event price in almost 100% probability of the rate cut. [/B]
Projected interest rate at 0.25% will become the lowest since foundation of BoE in 1694. The financial institution will also release revised GDP and CPI forecasts which is expected to contain no recession warnings, according to Bank of America analysts. However the figures will be probably revised towards the slump, analysts say.

The confidence in stability of UK economy was eroded after manufacturing and service PMI reports showed activity in the sectors fell to the lowest level for several years. Being a main gauge of economic potential of the country, grim PMIs forced BoE to mull seriously over easing as some risks threatening the country began to “crystallize” according to the last BoE financial stability report. Service PMI in July contracted to 47.4 points from 52.3 points in June, renewing lows of 2009 year.

Meanwhile, inflation in country which were endeavored to bring to target of 2% in 2013, may accelerate to 3% by the end of 2017, mainly due to the depreciation of the pound. According to the experts of the National Institute of Economic and Social Research UK, the UK economy is likely to grow by 1.7% in 2016, and only 1% - in 2017. Nevertheless, the Central bank provides more soothing projections - inflation in the country will climb above target level of 2% in 2018, and will reach 2.2% in 2019. In June, consumer prices rose only 0.5%.

Pound hovers near close at 1.3330 ahead of BoE, investors buy UK Gilts which yield fell by -0.06%. German bonds yield also fell by 32.35% to -0.045. Gold fell half of percent on expectations of monetary easing.

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[B]Trading analysis and signals 08.08.2016[/B]

Non-Farm Payrolls report released last Friday soothed investors concerns regarding the health labor market in US. Two opposite extreme NFP readings in May (38K) and June (revised to 292K) kept investors puzzled whether they need to quit risk assets or extend hunting for higher yields. As US Labor department reported 255K jobs created in July, beating analysts forecasts (180K)…

Read more: Trading signals 08.08.2016 - Broker Arena

[B]Trading signal 11.08.2016. Taking stock of EIA oil inventories report[/B]

Today I would like to take a stock of crude inventories report released by US Energy Department on Wednesday. It’s widely known that the data from this report can signifcantly affect prices of Oil, but in my view, from recent time it has been considered very straightforward and shallow. Oil stockpiles rose – prices drop, stockpiles fell – prices go up. Plain and simple, but sometimes this approach hide other key trends which do really sets the tone on energy market.

Read more: Trading signal 11.08.2016. Taking stock of EIA oil inventories report. - Broker Arena

Greenback got a crushing blow on Friday from US Advance Retail Sales report which showed weakest growth since April. The headline figure at 0.0% was 0.4% lower than medium analysts forecast triggering a rout among greenback bidders…

Read more: Trading signals and analytics 15.08.2016. Digesting Retail Sales data

[B]Trading signals and analytics 22.08.2016[/B]

Here is a brief overview of important economic events (past and due) you should start the week with:

FED Vice Chairman Stainley Fischer said in his interview on Sunday that US economy is close to arrive at its key economic goals – full employment and 2% inflation, fueling speculations Rate Hike can be in the pipeline.

The New-York Fed governor William Dudley said last Tuesday FED may raise rates as soon as in September, although futures for interest rate price in only 18% of increase on next FED meeting.

Read more…Trading signals and analytics 22.08.2016

[B]Trading signals 13.09.2016. Digesting gov. bonds data[/B]

As the day of FOMC meeting is just around the corner and almost all market speculations boil down to the rate hike dilemma I would also like to add my two cents into this buzz…

Read more - Trading signals 13.09.2016. Digesting gov. bonds data

[B]Trading signals 20.09.2016. In the run-up to FOMC [/B]

While traders all over the world are bracing for the rate hike decision due September 20-21 and BoJ Policy Statement on September 21, its important to take a look at preceding remarkable events which could be useful to follow market sentiment ahead of the Central Banks’ updates.

Read more - Trading signals 20.09.2016. In the run-up to FOMC