Thursday, May 2, 2019
Energy prices are seeing losses on Thursday, amid weakness in European equities, mixed trade in Asian markets following largely downbeat economic data releases from India, the Eurozone, and Britain, as well as with data showing Russia has yet to reach 100% compliance with its OPEC+ output target. Weakness this morning came despite slight gains in US stock market index future and a small dip in the US dollar index. Energy traders are looking ahead to weekly US jobless claims data, as well as to figures on productivity and costs and factory orders, for further direction.
The Russian Energy Ministry reported Russian oil production fell to 11.23 mb/d in April, from 11.30 mb/d in March. This is still above the 11.18 mb/d target for Russia under the OPEC+ agreement, putting Russia’s compliance rate at about 79 percent. Energy Minister Alexander Novak stated that Russian production this month would be compliant with the agreement.
In other supply-side news, the government of Alberta, Canada, has enacted the “Preserving Canada’s Economic Prosperity Act,” also known as the “turn off the taps” act, which was passed but not enacted by the previous government. The law enables the government to restrict oil and gas flows to neighboring British Columbia, with whom Alberta has an ongoing dispute over the Trans Mountain pipeline and expansion. The expansion would triple capacity to 890 kb/d.
Economic data this morning is largely focused on the manufacturing sector, and were largely soft. The Nikkei Manufacturing PMI for India fell to 51.8 in April, from 52.6, indicating slower growth. Eurozone manufacturing continued to shrink, but at a slightly lower and slightly lower than expected pace, as the manufacturing PMI saw a slightly larger than predicted increase last month, to 47.9. Contraction in the German manufacturing sector also slowed, but less than expected, with the PMI at 44.4. Retail sales in the country contracted less than expected in March (0.2%), but only due to a downward revision to February sales growth. The only (slightly) bright spot appeared to be a stronger than predicted rise to 50.0 for the French manufacturing index, back to breakeven. In the UK, the construction PMI came in at a stronger-than-predicted 50.5, recovering from a contraction (49.7) in March. European markets were trading mostly lower as of this writing, whereas Asian markets had recovered some and were trading mixed. US stock market index futures pointed to modest gains at the open.
Petroleum futures settled mixed on Wednesday, with WTI crude losing ground following bearish weekly crude oil inventory data from the Energy Information Administration, whilst Brent crude prices edged higher – perhaps supported by the expiration of US sanctions waivers for buyers of Iranian crude oil. Also supportive for the complex was further weakness in the US dollar index. The Federal Open Market Committee meeting bore no surprises, with interest rates held steady. WTI crude lost 31 cents to settle at $63.60 a barrel, Brent crude added 12 cents to close at $72.18 a barrel, gasoline futures slipping 26 points lower to $2.0642 per gallon, heating oil settled 1.63 cents stronger at $2.0942 per gallon and natural gas added 4.5 cents yesterday for a $2.620 per MMBTU settlement.