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Saturday 1 April 2017
Friday 31 March 2017
Crude dips in Asia on profit-taking, rig count, Trump-Xi eyed
Crude oil dipped in Asia on profit taking after three days of gains and despite upbeat figures from China on manufacturing and services for March that gained more than expected in cautious trade as U.S. rig count data lies ahead and markets look to a meeting between President Donald Trump and China's Xi Jinping in Florida that is seen as high stakes on trade.
On the New York Mercantile Exchange crude futures for May delivery dipped 0.34% to $50.18 a barrel, while on London's Intercontinental Exchange, Brent eased 0.41% to $52.91 a barrel.
China's semi-official manufacturing PMI rose to 51.8, the China Federation of Logistics & Purchasing (CFLP) said Friday, beating the expected 51.6 level and releasing the figures one day ahead of the normal first of the month release and ahead of the Caixin PMI figures.
Earlier in Japan, household spending for February slumped 3.8% year-on-year, compared to a 1.7% decline seen. On a monthly basis however it rose 2.5%, beating the expected 0.4% rise.
Separately, national core CPI fell 0.2% for February year-on-year as expected, while unemployment dipped to 2.8% from 3.0%. Provisional industrial production for February rose 2.0% month-on-month, beating the expected 1.2% increase.
Market participants turn attention to Baker Hughes rig count, due to be released on Friday at 13:00 EDT. Data last weekrevealed that the number of active U.S. rigs drilling for oil rose by 21, the tenth weekly increase in a row. That brought the total count to 652, the most since September 2015.
The White House said Trump would host Xi next Thursday and Friday at his Mar-a-Lago retreat in Florida. It said Trump and his wife, Melania, would host Xi and his wife, Peng Liyuan, at a dinner next Thursday.
Overnight, crude futures settled higher on Thursday, amid optimism that an OPEC led production cut deal would be extended beyond June, following bullish comments from Kuwait oil chief Essam al-Marzouq.
Crude futures settled above the key $50-level, as crude prices hit a three-week high of $50.45, after Kuwait oil minister Essam al-Morzouq said his country was among several nations that supported the idea of extending the current deal between OPEC and non-OPEC members beyond June.
In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day (bpd) in an effort to combat the oversupply issue that has pressured prices over the last two years.
OPEC members have been high compliance with the deal to cut supply, which came into effect in January this year, while a ramp up in U.S. production of shale and crude has weighed on oil prices.
Despite, a dip in crude inventories on Wednesday, crude stockpiles remain at record highs – at over 520 million barrels, current crude supplies are up 6% over the past year. Rising U.S. crude stockpiles sparked concerns that OPEC may struggle to drain the glut in supply.
Thursday 30 March 2017
U.S. natural gas futures stay lower after weekly storage data
U.S. natural gas futures declined on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. fell broadly in line with market expectations last week.
U.S. natural gas for May delivery shed 3.4 cents, or around 1.1%, to $3.197 per million British thermal units by 10:35AM ET (14:35GMT). Futures were at around $3.196 prior to the release of the supply data.
It settled higher for the second day in a row on Wednesday after touching its strongest January 31 at $3.253
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. declined by 43 billion cubic feet in the week ended March 24, compared to forecasts for a drop of 42 billion.
That compared with a withdrawal of 150 billion cubic feet in the preceding week, a decline of 25 billion a year earlier and a five-year average drop of 27 billion cubic feet.
Total natural gas in storage currently stands at 2.049 trillion cubic feet, according to the U.S. Energy Information Administration, 17.1% lower than levels at this time a year ago but 12.2% above the five-year average for this time of year.
Meanwhile, traders continued to monitor shifting early-spring weather forecasts. Weather systems will track across the country the next several days with rain, snow, and thunderstorms, but with limited cold air as they play out spring-like, according to forecasters at NatGasWeather.com.
There remains potential for a bit colder system from April 7 through the 10th and will be dependent on how a weather system tracking over the southern U.S. phases with a cold blast over the Midwest.
Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on early-spring demand.
The heating season from November through March is the peak demand period for U.S. gas consumption.
Nearly 50% of all U.S. households use gas for heating.
Dollar index struggles to hold 100 mark
The dollar index Thursday struggled to hold the 100 mark despite relatively upbeat U.S. economic data.
The dollar index was up 0.09% at 09:45 ET at 99.87 after a high of 100.09, it highest level since March 21.
U.S. Q4 GDP growth was revised up to 2.1% from an earlier reading of 1.9%.
Initial weekly jobless claims fell but by less than expected.
The dollar index was aided by a weaker euro, which fell 0.21% to $1.0742.
Reuters Wednesday reported the ECB does not intend to change its dovish guidance on monetary policy.
The pound was up 0.64% at $1.2515, recovering from lows posted on the U.K. triggering Brexit.
The dollar firmed 0.09% to 111.15 yen.
As Fed Speeches Dominate, Gold Heads South
This week, speeches of most of the FOMC’s twelve members were scheduled to take place . What can we learn from them?
The current week is dominated by the next round of Fed officials’ speeches. Although some of the events – including Yellen’s speech on Thursday – are yet to come, let’s analyze what has already been said.
On Monday, Chicago Fed President Charles Evans noted that the economy’s performance might justify three hikes this year, but the Fed might raise interest rates four times, if the economy really takes off (or just twice, if uncertainty increases).
On the same day, Dallas Fed President Robert Kaplan said that he would back more interest rate increases as long as the economy saw gains.
On Tuesday, Kansas Fed President Esther George pointed out that she needed more details on the Trump administration's fiscal proposals to factor them into her economic forecasts, while the Fed Vice Chairman Stanley Fischer told reporters that the FOMC’s median estimate for three hikes this year seemed about right.
On balance, the presented remarks did not bring anything new, as the Fed’s officials reiterated that inflation is on the way to reach Fed’s target, but that many uncertainties remain. However, they reminded investors of rate hike plans. Indeed, the market odds of a June hike increased from 49.6 to 54 percent. The recent economic data could also reinforce the rate hike expectations, as new orders for durable goods increased 1.7 percent in February, while consumer confidence surged in March to a 27-year high. This is why the US Dollar Index edged up yesterday, while gold prices went south.
However, the uncertainty about Trump’s policy seems to provide support for the yellow metal. Investors should remember that consumer and business confidence is not hard data, but subjective opinions – for example, confidence was high before the financial crisis. Another example: Markit Flash U.S. Composite PMI Output Index declined from 54.1 in February to 53.2 in March, signaling the slowest expansion of private sector output since September 2016. It seems that the confidence is high due to the elevated expectations about Trump’s economic agenda. Although the new administration is determined to fulfill its promises, the failure of Trumpcare signals that it will not go as smoothly as expected.
Anyway, there are still a few Fed speeches left – and they can affect the gold market. Stay tuned!
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
U.S. jobless claims fall by 3,000 to 258,000 last week
The number of people who filed for unemployment assistance in the U.S. last week fell less than expected, but held near the lowest level since March 1973, underlining optimism over the health of the labor market.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending March 25 declined by 3,000 to a seasonally adjusted 258,000 from the previous week’s total of 261,000.
Analysts expected jobless claims to fall by 13,000 to 248,000 last week.
The four-week moving average was 254,250, up 7,750 from the previous week. The monthly average is seen as a more accurate gauge of labor trends because it reduces volatility in the week-to-week data.
Continuing jobless claims in the week ended March 18 rose to 2.052 million from 1.987 million in the preceding week. Analysts had expected continuing claims to inch up to 2.020 million.
USD/JPY was at 111.34 from around 111.23 ahead of the release of the data, EUR/USD was trading at 1.0734 from around 1.0743 earlier, while GBP/USD was at 1.2457 from 1.2465.
The US dollar index, which tracks the greenback against a basket of six major rivals, was at 100.00, compared to 99.94 ahead of the report.
Meanwhile, U.S. stock futures pointed to a slightly lower open. The blue-chip Dow futures shed 16 points, the S&P 500 futures dipped 2 points while the tech-heavy Nasdaq 100 futures fell 5 points.
Elsewhere, in the commodities market, gold futures traded at $1,246.70 a troy ounce, compared to $1,249.80 ahead of the data, while crude oil traded at $49.84 a barrel from $49.81 earlier.
Forex - Dollar index holds onto gains after upbeat U.S. data
The dollar remained broadly higher against other major currencies on Thursday, after the release of upbeat U.S. economic growth and jobless claims data added to optimism over the strength of the economy.
EUR/USD slipped 0.28% to 1.0735, the lowest since March 21.
The dollar was supported after official data showed that the third estimate of fourth quarter gross domestic product was at 2.1%, up from the previous reading of a 1.9% expansion. Analysts had expected a growth rate of 2.0%.
Separately, the U.S. Department of Labor said initial jobless claims declined by 3,000 to 258,000 in the week ending March 25 from the previous week’s total of 261,000. Analysts expected jobless claims to fall by 13,000 to 248,000 last week.
Meanwhile, the euro remained under pressure after Reuters reported on Wednesday that European Central Bank policymakers are wary of adjusting their policy message in April amid concerns over a potential surge in borrowing costs in the bloc’s periphery.
Elsewhere, GBP/USD edged up 0.18% to 1.2457.
Sterling initially weakened after British Prime Minister Theresa May formally began Brexit proceedings on Wednesday, launching a two-year negotiation process before the divorce comes into effect in late March 2019.
USD/JPY rose 0.24% to 111.33, while USD/CHF held steady at 0.9969.
The Australian dollar was little changed, with AUD/USD at 0.7671, while NZD/USD shed 0.24% to 0.7014.
Meanwhile, USD/CAD fell 0.11% to trade at 1.3314.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.24% at 100.02, the highest since March 21.
Oil flat as supply glut concerns weigh
Oil was mostly flat Thursday as concerns about a supply glut wiped out earlier gains amid disruption to Libyan output. U.S. crude was unchanged at $49.51 at 08:00 ET. Brent crude shed 10 cents, or 0.19%, to $52.44. The Energy Information Administration reported a lower than expected rise in U.S. crude inventories. Stockpiles still remain at record highs of 534 million barrels. Gasoline stockpiles fell more than expected. Higher U.S. supply and inventories continue to weigh on the market. That is undermining the impact of production cuts by major producers. OPEC and non-OPEC producers are cutting output by 1.8 million barrels a day in the first half. There are expectations the cuts could be extended beyond June.
Gold extends retreat from 1-month highs as dollar gains ground
Gold prices edged lower for a third straight session on Thursday, adding to their decline from a one-month high reached at the start of the week as the dollar strengthened amid expectations for more U.S. interest rate hikes this year.
Comex gold futures dipped $3.20, or around 0.3%, to $1,250.50 a troy ounce by 3:00AM ET (07:00GMT). Meanwhile, spot gold was down $2.50 at $1,251.10.
Gold hit its strongest since February 27 at $1,264.20 on Monday.
Also on the Comex, silver futures for May delivery shed 6.4 cents, or about 0.4%, to $18.18 a troy ounce. In the previous session, the metal touched its highest since March 2 at $18.27.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 99.86 in London morning trade.
It rose to an overnight high of 99.99, extending a bounce off a four-and-a-half month low of 98.67 touched on Monday.
The greenback was boosted by hawkish comments from a number of Federal Reserve officials on Wednesday, including Chicago Fed President Charles Evans and San Francisco Fed President John Williams.
There are three more Fed speakers on the calendar for Thursday. New York Fed chief William Dudley is expected to be the most important, with a 4:30PM ET discussion on financial conditions and monetary policy.
San Francisco Fed President Williams speaks at 11AM ET, while Dallas Fed President Robert Kaplan speaks at 3PM in New York.
On the data front, investors will have initial jobless claims and the final look at fourth quarter GDP, both released at 8:30AM ET.
The Fed raised interest rates earlier this month and stuck to its outlook for two more hikes this year.
Fed fund futures priced in around a 50% chance of a rate hike in June, according to Investing.com’s Fed Rate Monitor Tool. Odds of a September increase was seen at about 70%.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Headlines from Washington will also be in focus, as traders await further details on President Donald Trump's promises of tax reform following the House's failure to vote on a plan to replace Obamacare last week.
Elsewhere in metals trading, platinum tacked on 0.4% to $959.70, while palladium declined 0.3% to $787.62 an ounce.
May copper futures dropped 1.4 cents, or 0.5%, to $2.662 a pound.
Oil up on Libya disruptions, but bloated U.S. market still weighs
Oil prices rose on Thursday, extending two days of increases as supply disruptions in Libya lifted the market, although bloated U.S. crude inventories curbed gains.
Prices for front-month Brent crude futures (LCOc1), the international benchmark for oil, were at $52.53 per barrel at 0659 GMT, up 11 cents from their last close.
In the United States, West Texas Intermediate (WTI) crude futures (CLc1) rose 17 cents to $49.67 a barrel.
The increases extended two days of gains which supported Brent well above $50 a barrel and lifted WTI within sight of that level.
Traders said supply disruptions in Libya were lifting the market and that falling U.S. gasoline inventories pointed to a tightening market there despite record crude stocks.
"While crude stocks did build, the build was significantly lower than expected. Product stocks, on the other hand, drew a lot more than expected. This information, combined with the supply disruption in Libya was good enough to give the market cause to buy eagerly," said Sukrit Vijayakar, director of energy consultancy Trifecta.
U.S. gasoline stocks fell 3.7 million barrels in the week ending March 24, compared with expectations for a 1.9-million barrel drop, the Energy Information Administration (EIA) said on Wednesday.
U.S. crude inventories , however, rose 867,000 barrels to a record of nearly 534 million barrels.
Key for the direction of oil prices will be whether an initiative led by the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production during the first half of the year will be extended, and how high compliance with the reduction targets will be.
OPEC, along with other producers including Russia, aims to cut output by almost 1.8 million bpd during the first half of the year.
OPEC compliance with its targets is expected to be 95 percent this month, up from 94 percent in February, according to Reuters surveys.
"This is extremely good for the cartel as it has helped them get a 10-15 percent increase in prices for 3 months now," Vijayakar said.
However seems lower by non-OPEC members like Russia, who have officially agreed to participate in cutting.
"Russia's 300,000 bpd cut commitment particularly has been called into question," Eurasia Group said this week in a research report.
"It is highly unlikely Russia will achieve an absolute 300,000 bpd reduction during the tenure of the current agreement," it added.
As markets remain bloated halfway into the curbs, there is a broad expectation that the supply cuts will be extended into the second half of the year.
Gold lower in Asia but support from India, China eyed
Gold prices edged lower in Asia on Thursday with demand prospects in the world's top two importers, China and India, in focus with physical and exchange traded fund demand on hopes tax reform by New Delhi could cut the cost of bullion imports and as Chinese buyers seek a hedge for a weaker currency.
Gold for April delivery on the Comex division of the New York Mercantile Exchange eased 0.14% to $1,251.90 a troy ounce. Copper futures on the Comex were last quoted at $2.676 a pound.
Overnight, gold prices traded modestly lower on Wednesday, weighed by a rise in the dollar, which continued to recover from multi-month lows, after the release of upbeat economic data.
Gold prices dipped to a session low of $1,246.50, as stronger than expected U.S. home sales data supported the narrative of a stronger U.S. economy, which pushed the dollar to session highs. The U.S. National Association of Realtors said its pending home sales increased by 5.5% last month, which was far above economists’ forecast of a 2.4% increase.
Meanwhile, British Prime Minister Theresa May triggered Article 50 on Wednesday, the legal process by which Britain will leave the EU. Article 50 gives the leaving country two years to negotiate an exit deal and once it's triggered, it can't be stopped except by unanimous consent of all member states.
Elsewhere, investors mulled over comments from Federal Reserve officials, as Fed member Charles Evans said Wednesday, he has confidence that two total rate increases in 2017 seems “very safe”.
Federal Reserve Bank of Boston President Eric Rosengren took a somewhat bullish outlook on possible rate hikes, after he said the U.S. central bank should be prepared to raise interest rates a total of four times in 2017 to prevent the U.S. economy from overheating.
Gold is sensitive to moves in U.S. interest rates, which lift the opportunity cost of holding non-yielding assets such as gold, while boosting the dollar in which it is priced.
Oil edges up on Libya disruptions, but bloated U.S. market still weighs
Oil prices edged up on Thursday, extending two days of increases as supply disruptions in Libya lifted the market, although bloated U.S. crude inventories curbed gains.
Prices for front-month Brent crude futures (LCOc1), the international benchmark for oil, were at $52.53 per barrel at 0445 GMT, up 11 cents from their last close.
In the United States, West Texas Intermediate (WTI) crude futures (CLc1) rose 19 cents to $49.70 a barrel.
The increases extended two days of gains which supported Brent well above $50 a barrel and lifted WTI within sight of that level.
Traders said supply disruptions in Libya were lifting the market and that falling U.S. gasoline inventories pointed to a tightening market there despite record crude stocks.
"Production issues ... deepened, with Libyan oil output falling to about 500,000 barrels per day due to the shutdown of pipelines from its biggest field," ANZ bank said on Thursday.
And while a rise in U.S. crude inventories weighed, ANZ said that "big falls in gasoline inventories, coming near the end of the refinery maintenance season, suggest crude oil inventories are on the cusp of declining".
U.S. gasoline stocks fell 3.7 million barrels in the week ending March 24, compared with expectations for a 1.9-million barrel drop, the Energy Information Administration (EIA) said on Wednesday.
U.S. crude inventories , however, rose 867,000 barrels to a record of nearly 534 million barrels.
Key for the direction of oil prices will be whether an initiative led by the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production during the first half of the year will be extended, and how high compliance with the reduction targets will be.
OPEC, along with other producers including Russia, aims to cut output by almost 1.8 million bpd during the first half of the year.
OPEC compliance with its targets is expected to be 95 percent this month, up from 94 percent in February, according to Reuters surveys.
However, compliance could be lower by non-OPEC members like Russia, who have officially agreed to participate in the cuts.
"Russia's 300,000 bpd cut commitment particularly has been called into question," Eurasia Group said this week in a research report.
"While it remains possible Russia can scrape together a combination of outages and natural decline at some west Siberian brownfields and spin this as a 300,000-bpd output cut, it is highly unlikely Russia will achieve an absolute 300,000 bpd reduction during the tenure of the current agreement," it added.
As markets remain bloated halfway into the curbs, there is a broad expectation that the supply cuts will be extended into the second half of the year.
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sell gold 28675 stop loss 28730 target 28620/28580
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