Oil Investors on Tenterhooks Ahead of OPEC Meet

Daily Analysis - 30/11/2017

Crude Opens Cautiously as Market Fixates on Vienna Outcome

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Oil futures are hanging near the close of the prior session in Thursday Asian trade, as heightened uncertainty over the outcome of a key OPEC meeting in Vienna overshadowed support from official US data that exhibited a drop in crude inventories. The cartel is widely-tipped to prolong an output-cap deal due to expire in March.

Russian Wariness Looms Over OPEC Deal


OPEC members will be gathering at its headquarters in the Austrian capital along with other major oil producers, most notably Russia, to extend a production cut agreement which came in to force last January and is due to end next March. Though most analysts anticipate OPEC will continue the deal by another nine months until the end of 2018, Russia may drag its feet after signalling it prefers a shorter arrangement that factors in a potential ramp up in production by US shale producers. Meanwhile, the US Energy Information Administration revealed Wednesday that domestic crude stockpiles declined by -3.40 million barrels during the week ended November 24th, outperforming projections for a dip of -3.15 million barrels from the consensus of analysts. In the meantime, Brent crude futures were last seen trending around the $62.70 per barrel-mark.

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Chinese Manufacturing Gauge Unexpectedly Picks Up


An official measure of China's factory activity expanded at a quicker pace in November, as strong domestic and foreign demand more than offset the headwinds created by parallel government campaigns to clean up the financial system and the environment. Figures from the National Bureau of Statistics published early Thursday showed that the Manufacturing PMI increased to 51.8 this month from 51.6 in October, topping the consensus estimate of a 51.4 reading. China's services sector also witnessed acceleration in activity, with the official PMI coming in at 54.8 in November compared to the prior month's 54.3 print. The Chinese economy has displayed surprising resilience in the first three quarters of 2017, with the latest bullish manufacturing print suggesting a continued firmness as the year draws to conclusion. AUDNZD, which is prone to fluctuations in Chinese macroeconomic data, is rallying Thursday morning to currently hover around 1.1090.

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Third Quarter US GDP Revised Higher


Stronger than previously estimated investment from businesses and government bodies led to an upward revision of the US economy’s third quarter growth rate.  The Commerce Department’s second reading of last quarter’s GDP showed that gross domestic product rose by an annualized rate of 3.30% to notch its fastest pace since the third quarter of 2014. The US economy was previously reported to have expanded by a 3.10% clip during the July to September quarter. Business investment surged to a 7.30% yearly pace, the biggest uptick in the category since the final quarter of 2016, while consumer spending grew at a 2.30% annual rate, down from 3.30% reported a period earlier. Wednesday's report also highlighted rising profitability for US corporations, with after-tax profits reversing from a -2.00% contraction during the second quarter to climb 4.90% in the third quarter. Following Wednesday’s gain, USDCHF is stuck within a tight range around 0.9840 in Thursday morning trade.

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UK Consumer Credit Growth at 18-Month Trough


In what is expected to relieve some of Bank of England’s concerns about a rapid build-up in consumer debt, figures from the Central Bank showed that growth in lending on credit cards and loans cooled again in October to an 18-month low. The BoE said annual expansion in unsecured consumer lending eased for the fourth time in five months, weakening to 9.60% in October from 9.80% in September. It was the slowest growth rate since April of 2016. In cash terms, net consumer lending increased by £1.45 billion ($1.94 billion) last month, down marginally from September. Wednesday’s remarks from Bank of England Deputy Governor Jon Cunliffe underscored that he did not believe British consumers were on a debt-adding spree, but warned the quick pace of household credit growth needed to be monitored. FTSE 100 futures tumbled -0.90% on Wednesday, as reports of a breakthrough in Brexit negotiations boosted Sterling while hurting stocks.

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