There is little doubt that the drivers those of an oil bent are looking for today will be the state of US inventories. Today’s precursor to the main event is the API data which shows a Crude draw of 2.4 million barrels against a -2.9 million call; a Cushing, Oklahoma storage draw of 2.2 million barrels against a TankWatch prediction of -3.3; a Gasoline build of 1.9 million barrels against a -0.9 call and lastly, a Distillate draw of 0.2 million barrels against a +0.2 million call. Of late, the EIA/DOE data has not been too dissimilar and if that proves to be the case again, then a clear signal is not really afforded. Arguably, the Gasoline build is a touch distressing for bulls as some infrastructure were closed in front of Hurricane Hilary’s landing, but next week’s figures will probably give a more reliable reading of any of the storm’s influence. 

With US oil stocks rather bland, the swathe of global PMI data being issued today will not be overshadowed. This morning Australia’s Judo Bank manufacturing, services and composite PMIs all missed expectations. Japan’s Jibun Bank data shows a small ‘beat’, but Japan’s economy has been something of an outlier of late, and unlike Australia has been more immune to the macro-economic flux that China finds itself in. Coming later are France, Germany, Eurozone, UK and the US and what oil watchers should be concerned with is that all of the predictions of their manufacturing PMIs are under 50, therefore they are all in contraction territory and readings below expectations will sound warnings again of lower oil demand.

There remains plenty for oil watchers to get their teeth into. Shell’s ongoing investigation into disruptions on the Trans-Nigerian pipeline that pushes Bonny Light along to the tune of 180,000 barrels per day, denting the relief felt after the recent repair of the leak at Forcados. Indeed, Nigeria’s shrinking ability to produce oil at anywhere near capacity might well be a future component when OPEC/EIA/IEA publish global production accounts. There is also the ongoing negotiations in Ankara, where Turkey and Iraq thrash out an agreement equitable to all as to how and when Iraq crude may yet again flow through Ceyhan. 450,000 barrels per day will take quite a bite out of the Saudi voluntary cut and might just be the reason the Kingdom possibly rolls into October. Dutch TTF remains above Eur40 MW/h due to the possibility of increased industrial action by Australian LNG workers, which still might have some bearing on European ‘switch’ fuel generation in a tight distillate market this winter. Yet, for all these chewable oil facets, it will take one untoward utterance at the forthcoming Jackson Hole Symposium to temporarily negate or make irrelevant oil-centric thinking.

GMT +1	Country	Today’s Data	Expectation
08.15	FR	HCOB Manufacturing, Services, Composite PMI	45, 47.5, 47.5 (AUG)
08.30	DE		38.7, 51.5, 48.3 (AUG)
09.00	EUR		42.6, 50.5, 48.5 (AUG)
09.30	UK	S&P/CIPS Manufacturing, Services, Composite PMI	45, 51, 50.3 (AUG)
13.30	CA	Retail Sales (JUN)	0%
14.45	US	S&P Manufacturing, Services, Composite PMI	49.3, 52.2, 52 (AUG)
15.00	EUR	Consumer Confidence Flash (AUG)	-14.3

 

Jackson Holes all thinking

It has become a rare occurrence when our market can be considered from an exclusive oil fundamental point of view rather than having to take the many and varied macro-economic drivers and sweep them all together under the carpet of consideration. 

Today, and this week so far, are no different in forming contemporary opinion as once again oil drivers find themselves outgunned by the wider suite. ‘Oilies’ have enjoyed a decent period when the state of product inventory, the inability for refiners to keep pace and Saudi’s self-imposed production cut, basked in the limelight of a rally which at present is only kept afloat by the impressive Heating Oil contract. But as ever, dreamy thoughts of an unhindered commodity-inspired price rise are interrupted yet again by the wake-up alarm of what we like to call here, the Grande-Macro. 

Resonating from the future of this week but causing consternation and more sensitivity to economic news of the present, is the Jackson Hole Symposium. Tomorrow, the great and the good of the banking world will meet over three days, with the rest of us hoping to catch on to what the finance fraternity are expectant of. Undoubtedly, the most important slot is reserved for the Chairman of the FED, Jerome Powell who is expected to speak at 10.05 Eastern Time/15.05 GMT +1 on Friday. 

Presumably, Mr Powell has a cadre of speech writers, let us just hope they are rather fleet of pen. The shifting sands of the economic world and market drivers do appear to be reaching some sort of nexus and it is not all whimsy to imagine that some of it is caused by Jackson Hole. For cause and effect are reversible, and the recent bond pricing is all to do with an expectation that the FED Chair will announce something akin to current interest rates maintaining their level for a longer period. This has been a growing worm in the minds of US Government bond traders who have marked down such treasury securities for the last month and in turn saw a rally on Monday in yields not seen since 2007 according to the Financial Times. This action is not peculiar to the United States alone, across the pond 10-year bonds yields in Germany and the United Kingdom also chased ahead which will bring credit chastening from banks. Indeed, but difficult to attribute to the above; S&P, the ratings agency, downgraded 5 US banks on Tuesday exampling the difficulties faced in a high interest rate, high yield environment. Furthering the cause of worriers and exasperating Mr Powell’s writers, is the pricing of 10-year US breakeven inflation which on Tuesday, and according to Bloomberg, rose 2-basis points to 2.332%. This is a fickle and changeable marker, but it probably could not have come at worse time for those that wish to hear the language of a soft-landing dove in Wyoming. 

Oil is likely to survive the hand wringing by bankers that will have markets on edge during the back end of the week. The current state of refinery runs and distillate stock will probably see to that. However, prolonged concentration on interest rates, inflation and the longevity of both at Jackson Hole alongside a parsimonious Powell speech, will see the ‘fact’ of a market slump outperform the ‘rumour’ or fancy of it.

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