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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Oil Markets Await Fed’s Decision This Afternoon

In honor of Cleo Laine’s 88th birthday, the crude market is swingin’ away today, trying to shimmy away from a two-month low. After a turbulent night, prices have reversed losses and are moving higher with a rallying euro, ahead of key market-moving announcements today. Meanwhile, as weather outlooks continue to lean balmy for the eastern U.S. into November, the good ship natural gas is sinking once more.

On the economic data front, Japanese retail sales numbers were negative year-on-year for the first time since April, underscoring economic frailty from the region. On to Europe, and French consumer confidence was below par, while both Italian business and consumer confidence came in better than expected.

German consumer confidence data was in line with expectations, but down for a sixth consecutive month from multi-year highs (hark, below). The sole U.S. economic data release this morning has come in the form of the goods trade balance, which showed a shrinking deficit by 13 percent in September to $58.6 billion. Related: How Long Can OPEC Hold Out?

ConsumerClimateIndex

German GfK Consumer Climate Index (source: investing.com)

It’s a game of two halves today in the U.S., as this morning’s focus remains solely on the weekly EIA oil inventory report, which should yield a fifth consecutive build to crude stocks, adding to the 22 million barrels added in the last four weeks. Draws are expected to the products, while refinery utilization should claw its way higher from the depths of refinery maintenance. Last night’s API report gave a humongous hat-tip to a crude build, rising by 4.1 million barrels.

The second half of the day is set for a surgical focus on the Federal Reserve’s every word, as we get the interest rate decision and subsequent statement this afternoon, followed by the grilling of Fed head Janet Yellen. Related: NatGas Glut Mirrors The Problems Facing Oil Markets

Yesterday we looked at BP’s historical capital expenditure, while the chart below takes a look at forward expectations, plotted with big oil buddies Shell and Total. The key theme? Yep, shrinking capex. Shell and Total both report tomorrow, while Shell has just announced it is halting an oil-sands project in Alberta, and will take a $2 billion charge. Belt tightening ahoy.

SplurgeAndPurge

The scary China story of the day comes from the Head of China’s steel industry, Zhu Jimin, who says demand is slumping at an unprecedented pace, as production cuts are slower than the drop in demand. “China’s steel demand has evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. Steel demand in China shrank 8.7 percent year-on-year in September. Eek. Related: U.S. Shale Lifelines Running Thin

From one wobbling economic region to another, the chart below illustrates economic growth in the area that ignited the Arab Spring is still struggling, faring worse than in pre-revolutionary times. Performance next year is unlikely to turn around, with Tunisia projected to expand at 3 percent, while Egypt will grow at 4.3 percent, according to the IMF. MENA on the whole continues to show slowing economic growth:

GrowthLags

Finally, an article today has highlighted how Iraq has overtaken Saudi Arabia once again in September by sending greater volumes of crude to India. As OPEC members are increasingly battling for market share in an overcrowded market, we can see in our #ClipperData that momentum keeps swinging from one to another, as competition intensifies:

CrudeExportsToIndia

(Click Image To Enlarge)

Crude exports to India, Saudi vs. Iraq (source: ClipperData)

By Matt Smith

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