Written on: September 1, 2022
Thursday, September 1, 2022
Energy futures are falling for a third consecutive session as of this writing Thursday morning. Lockdowns in China, the potential for a revival of the nuclear agreement with Iran, strength in the dollar and weakness in equities likely weighed on the price action. Energy traders have a busy day on the US economic calendar with weekly jobless claims, the Challenger Job-Cut report, the S&P Global Manufacturing PMI, ISM Manufacturing Index, construction spending, and the second estimate of second quarter productivity reports due out today.
Reuters reports French president Macron said he hopes the Joint Comprehensive Plan of Action (JCPOA, also known as the P5+1 nuclear agreement with Iran) will be concluded “in the next few days.” In other news from Europe, Group of Seven finance ministers are expected to discuss a price cap on Russian oil when they meet tomorrow. In supportive supply-side news this morning, two Reuters sources say that output at the Kashagan oilfield in Kazakhstan is running at about one quarter of its normal 400kb/d rate and that these low levels could persist through the end of next month. Upgrades last month were meant to increase production to 500kb/d but were derailed by a gas leak.
Coronavirus cases continue to rise in Shenzhen, China, where restaurant dining and entertainment venues have seen curbs in activity in half of the ten districts in the city. The Caixin China Manufacturing PMI for August came in at 49.5, below expectations at 50.2 and indicating contraction in the sector last month. The Shanghai Composite lost 0.54% overnight and the Hang Seng dropped 1.79% lower. The Jibun Bank Japan Manufacturing PMI for August came in at 51.5, indicating continued (but slower) expansion in the sector. The Nikkei sold off 1.53%. In European news this morning, the Italian economy grew 1.1% in the second quarter, a surprise upward revision from 1.0% in the previous estimate. German retail sales grew 1.9% in July against expectations for a 0.4% drop. The unemployment rate in the Eurozone came in at 6.6% for July, matching expectations. On the other hand, the final S&P Global Eurozone Manufacturing PMI for August saw a slight downward revision to 49.6. The index for Germany was revised down to 49.1, but the index for France was revised up into expansionary territory at 50.6. The final CIPS/S&P Global UK Manufacturing PMI was revised up to 47.3. Despite generally encouraging data, the FTSE 100 was down 1.2%, the DAX had lost 1.0% and the CAC 40 had also fallen by 1.0% this morning. Futures for the major US stock market indexes are seeing losses of between 0.3% (Dow and S&P 500 futures) and 0.6% (Nasdaq futures). Also unsupportive for crude, the US dollar index was up 0.3%.
Energy prices sold off for a second session on Wednesday amid disappointing US labor market data and losses in US and European shares, as well as bearish oil market forecast revision from the OPEC+ Joint Technical Committee. Brent crude fell $2.82 to close at $96.49 a barrel, WTI crude settled down $2.09 at $89.55, gasoline futures fell 8.85 cents to settle at $2.6059 per gallon, heating oil futures settled 10.17 cents weaker at $3.7154 and natural gas futures added 8.5 cents for a settlement price of $9.127 per MMBTU.