Twenty-seven years to the day after Guns N’ Roses released the single ‘Patience’ (anyone feel old? Nope? Me neither…), and the crude market is trying to bide its time ahead of Nonfarm Friday tomorrow, but is getting buffeted around by a choppy U.S. dollar. Here are seven things to consider today:
1) Taking a look at the economic data, Europe had a swathe of releases out earlier; German retail sales were negative for a second consecutive month, down 0.4 percent MoM, while unemployment remained at a record low of 6.2 percent.
British data exuded all the joys of spring, as GDP was better than expected, up 0.6 percent for the quarter (in Q4), while money supply showed strength last month, as did mortgage approvals. Related: Is A Gas War Between The U.S. And Canada About To Start?
2) Preliminary inflation data from the Eurozone was a mixed bag, with Germany, France and Italy better than expected, Spain worse. On the aggregate, Eurozone core inflation is up to 1.0 percent YoY. As we know all too well, all paths lead back to energy, hence headline inflation remains in deflationary terrain at -0/1 percent YoY…due to lower energy costs.
3) Today’s preliminary print for Eurozone inflation has lifted the euro to a seven-week high. This is helping to ease the dollar index lower, lending a modicum of support to crude prices, although the Bank of Japan Governor Haruhiko Kuroda has tried to weaken the yen overnight, saying there is no limit to its current quantitative easing plan.
The chart below highlights how the weaker dollar – in response to a stronger euro and yen – has bolstered crude prices in the last two months:
(Click to enlarge) Related: Will Weak Fundamentals Force Saudis To Action
4) Onto the U.S., and jobless claims have let us down a little bit ahead of tomorrow’s official monthly employment report. Weekly claims have come in at 276,000, higher than the consensus of 265,000. Yesterday’s ADP report showed 200,000 jobs created last month, and 205,000 are expected from nonfarm payrolls tomorrow.
5) After last week’s natural gas storage report yielded the first injection of the year, colder weather means we are set to return to a withdrawal today, with consensus for a ~25 Bcf draw. This would be more than last year’s -10 Bcf, but adjacent to the five-year average of -22 Bcf. As weather outlooks lean towards colder-than-normal for the Northeast and parts of the Midwest into April, natty is close to the two-dollardom for the first time since early February.
6) Next up is another example of the far-reaching impact of the oil slump, for helicopter sales are plummeting. Some 26 percent of commercial helicopters are used in the oil and gas industry, hence given the drop in drilling activity, a fifth of the 1,900 helicopters used in the oil-and-gas industry worldwide are either idle or underemployed. Related: Which Energy Companies Are Most At Risk From The Spring Redetermination?
(Click to enlarge)
7) Finally, a piece today discussing how much Asia relies on the Middle East for its crude oil set me off delving into our ClipperData. Taking a look at the region on aggregate, year-on-year exports from the Middle East to Asia have risen for nine of the last twelve months. Flows into Asia over this period are averaging a monthly 3 percent increase on year-ago levels. That is a fair old pace, my friends.
(Click to enlarge)
By Matt Smith
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