U.S. Crude at 1-Month Low

Daily Analysis - 31/08/2017

Investors Brace for Harvey Impact

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U.S. crude futures ended Wednesday at their lowest level in over four weeks as traders price in the impact of Tropical Storm Harvey, which shut close to a quarter of the country’s refinery capacity. U.S. Crude futures for October delivery were last trading around the $45.90-mark.

U.S. Weekly Crude Supplies Fall


The market appeared unfazed by the latest data, which showed a significant weekly decline in U.S. crude stockpiles. The U.S. Energy Information Administration said Wednesday that domestic crude inventories fell by 5.40 million barrels during the week ended August 25, following declines in each of the previous eight weeks. Analysts polled by S&P Global Platts were anticipating a dip of 1.50 million barrels.

Traders expect next week’s EIA data, which will coincide with the time when Harvey hit the Texas Coast, to reveal a large build-up in supplies due to refinery outages. According to Reuters estimates, approximately 4.40 million barrels of U.S. refining capacity was unavailable due to flooding and damage from Harvey, representing almost a quarter of U.S. refining production.

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U.S. Private Sector Adds More Jobs than Forecast


U.S. private payrolls jumped at their fastest pace in five months in August, buoyed by strong gains in manufacturing and construction jobs, according to latest data from Automatic Data Processing and Moody's Analytics. Companies hired 237,000 workers in the last full month of summer, easily topping the 185,000 that economists surveyed by Reuters were expecting. July’s private sector hiring increase was revised up to 201,000 from the previously reported 178,000.

The ADP figures come ahead of Friday’s official non-farm payrolls report, which covers both the public and the private sector. Economists surveyed by Reuters are projecting for U.S. non-farm employment to have grown by 180,000 jobs in August. The unemployment rate is likely to stay unchanged at 4.30%. Dow Jones Industrial Average September futures are currently hovering around 21900.

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Chinese Manufacturing Activity Picks Up


Chinese manufacturing sector growth unexpectedly accelerated in August, indicating the world’s second biggest economy is still expanding at a healthy rate despite rising financing costs. The official Purchasing Managers’ Index stood at 51.7 in August, versus the prior month’s 51.4, managing to remain well above the 50-threshold that separates growth from contraction. Analysts polled by Reuters were expecting an August reading of 51.3.

The sub-index of manufacturing production edged 0.6 points higher to 54.5 in August, while new factory orders increased to 53.1 from 52.8 in July, data from the National Bureau of Statistics showed early Thursday. The Chinese manufacturing sector has been recording solid growth on the back of robust domestic infrastructure spending and a rebound in exports. However, a majority of economists expect growth to slow during the second half of the year as higher borrowing costs drag on economic activity. AUDUSD, which is prone to fluctuations in Chinese data, is currently perched on the strong support level around 0.78900.

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U.K. Consumer Confidence Improves


British consumer confidence marginally increased in August, according to a closely-followed survey, despite a slew of key economic data points forecasting a deteriorating outlook for the country’s economy amidst stalling Brexit talks. Market research firm GfK’s monthly consumer sentiment index gained to -10 in August from -12 in July, confounding consensus expectations for a drop to -13. GfK carried out the survey on behalf of the European Commission between August 1 and August 15.

The overall index takes into consideration a number of factors, including people’s view of the economy as a whole and their own financial situation. The U.K. economy has posted its weakest start to the year since 2012 as consumers increasingly came under pressure from a big spike in inflation following the sterling’s precipitous decline last year after the Brexit vote. FTSE September futures were last seen around the 7370-zone.

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