US Crude Futures Slip Beneath $50

Daily Analysis - 05/10/2017

Record US Exports Drag Oil Prices Lower

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US crude oil futures dropped below the $50-mark amid record US exports according to the latest report published by the Department of Energy. Investor sentiment was also hurt following a Bloomberg reported highlighting the restart of shuttered Libyan operations after they were taken offline over the weekend.

Bears Regain Control of Crude Futures


Data from the US Energy Information Administration late on Wednesday showed that US crude exports soared to 1.98 million barrels per day last week, much higher than the 1.50 million bpd reported just a week prior. The increase in exports has been triggered by the large discount in prices for West Texas Intermediate crude compared to Brent crude, which makes oil exports from the country increasingly attractive. US crude futures for November delivery fell for a third session on Wednesday. Prices stabilized in early Asian trade on expectations that top producers Saudi Arabia and Russia would work to extend output cuts during November OPEC and non-OPEC discussions. US crude futures are currently hovering around $49.90 a barrel. Considering the bearish short-term trend, a break below the strong support at $49.50 could spur a fresh bout of selling pressure.

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US Private Sector Job Growth Slows


Private companies in the United States added the fewest number of workers in close to a year last month, hurt by one of the worst hurricane seasons ever.  According to data released by the ADP Research Institute, private payrolls grew by 135,000 in September, marking a sharp decline from the August figure of 228,000. Economists polled by Reuters were expecting the addition of 125,000 jobs last month. The report is the latest to show the extent of impact on the US economy due to hurricanes Harvey and Irma. Small businesses shed jobs in September, while medium and large firms recorded payroll gains. The ADP report comes ahead of Friday's official jobs data, which is projected to show a gain of just 93,000, a big drop from August's 156,000 reading. In the meantime, Nasdaq futures were last seen above the key psychological level of 6000, hovering not far below record highs.

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UK Services Growth Picks Up


The Markit monthly UK services PMI rose to 53.6 in September, slightly better than economists’ forecast and easily topping the 50-mark that separates expansion from contraction. The robust figures for the sector that accounts for roughly 80.00% of the British economy should come as a relief for investors after both manufacturing and construction surveys disappointed earlier in the week. The PMI surveys are considered useful leading indicators of economic activity, especially because they reflect purchasing managers’ future expectations. However, the one soft spot that emerged was new business growth which tumbled to its lowest level in over a year.  Many clients withheld new investment decisions because of the uncertainty surrounding Brexit and the troubling outlook associated with an exit. GBPJPY is currently perched just above the key support at 149.000, with any breach of that zone potentially unlocking further downside in the pair.

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Australia Trade Surplus Widens


On a seasonally adjusted basis, Australia recorded a trade surplus of AUD$ 989.00 million in August compared to a positive balance of AUD$ 808.00 million reported in July.  The figures published by the Australian Bureau of Statistics overnight came in slightly wider than the average analysts' estimate for a surplus of AUD$ 850.00 million. The value of exports edged 1.00% higher, while import growth stayed flat for the period. Separate data from the Australian Bureau of Statistics revealed that retailers faced their worst level of sales in August since early 2013 as debt-saddled consumers cut back on purchases. Retail sales dipped -0.60% in August, easily underperforming projections calling for a 0.30% rise. The July sales number was also revised lower to show a -0.20% decline.  In light of the disappointing retail figures, AUDJPY has erased the prior two session’s gains, tumbling in Thursday morning trade to around 88.250.

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