US Crude Tops $50

Daily Analysis - 15/09/2017

Oil Demand Outlook Brightens

US crude oil futures rose above the key psychological barrier of $50.00 a barrel on Thursday amidst signs of buoyant demand even though onshore stockpiles have climbed steadily the last few weeks in the aftermath of Hurricane Harvey. Brent crude futures hit their highest level since April, soaring over 1.00% in the previous trading session.

US Gulf Coast Refineries Resume Operations

West Texas Intermediate crude futures are on track for a near 5.00% gain this week, spurred by the return of refinery operations after Hurricane Harvey forced them to shutter.

The demand outlook for oil has also brightened considerably after the Organization of the Petroleum Exporting Countries pointed to signs of the global supply glut shrinking on the heels of reduced production from OPEC and non-OPEC countries.

The US oil benchmark got an extra boost on Thursday after an electrical fire at Canadian Natural Resource’s Horizon oil sands project. While a spokesperson for the company said output was not affected, physical markets in North America nonetheless surged following the report.

US crude futures spiked to as high as $50.49 a barrel on Thursday, before pulling back below $50.00 in thin Friday trading.

US Inflation Reaches 7-Month Peak

Consumer prices across the United States accelerated in August, driven primarily by gains in prices for gasoline and residential rents. Apart from delivering renewed signals of improved inflation, the figures could pave the way for the Federal Reserve to contemplate tightening monetary policy further before the end of the year.

The Consumer Price Index gained 0.40% last month after edging 0.10% higher in July. The rise in August marked the single largest gain in seven months and lifted the yearly increase in CPI inflation to 1.90% from 1.70% in July.

Economists surveyed by Reuters had forecast consumer prices to rise 0.30% on the month and climb 1.80% year-on-year. Excluding the volatile food and energy components, consumer prices rose 0.20% in August, following four consecutive monthly increases of 0.10%.

Economists expect the Federal Reserve to announce a plan to start normalizing its balance sheet at the end of its September policy meeting. In the meantime, USDCHF was last seen around the 0.9640-mark.

Bank of England Paves Way for Rate Hike

The Bank of England gave its clearest signal to date that the UK’s first interest rate hike in a decade is approaching after the Central Bank said it was likely to raise rates in "the coming months" if the economy and price pressures continue growing.

Data released earlier this week showed prices gaining faster and unemployment slipping to a four-decade low. The BoE remarked that the economy was closer to running at full capacity amid rising employment and higher wages, which in turn had increased inflationary pressures.

As was widely expected, policymakers at the bank voted 7-2 to keep interest rates unchanged at a record low 0.25%.

However, the new hawkish guidance pushed the sterling to a one-year high against the US dollar, with the GBPUSD pair currently trending around 1.3410.

New Zealand Manufacturing Rebounds

Manufacturing activity across New Zealand bounced back from a winter slump in August on the back of better than expected production and new orders according to data released overnight.

The widely followed BNZ Business NZ Performance of Manufacturing Index climbed to 57.9 last month from 55.5 in July. A figure above 50.0 indicates expansion while any figure below suggests a contraction in the sector.

BNZ Senior Economist Craig Ebert stated that the PMI reading, taken alongside the recent strong consumer and business confidence surveys, could translate into GDP growth comfortably reaching between 2.50% and 3.00% this year.

Second quarter growth numbers are due next week, with the consensus forecasting a 0.80% increase in gross domestic product for the three months ending in June.

The NZDJPY pair is rallying in Friday morning trade to currently hover just above 80.000.