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NEWS & ANALYSIS
Petroleum futures were losing ground in the overnight session on Tuesday amid rising Russian crude oil production, despite another US producer bankruptcy, strength in European and US shares, and a continued slide in the value of the US dollar against a basket of currencies. Economic data so far had been mixed and focused on the manufacturing sector, and market participants looked ahead to US data in the form of weekly jobless claims, personal income and outlays, construction spending, and also manufacturing (both from Markit and ISM) figures for further direction.
Reuters reports that sources put Russian oil and condensate production at 9.93mb/d last month, up from a 9.86mb/d average in August. Meanwhile, in US news from Reuters, Lonestar Resources US Inc – a Texas-based shale driller - has filed for Chapter 11 bankruptcy protection.
In economic news, the September Nikkei/Markit Manufacturing PMI for Japan came in at 47.7, an improvement from a 47.2 print in August, but not quite back to the breakeven mark of 50. More encouragingly, the index for India jumped from 52.0 to 56.8, indicating the expansion in the sector accelerated last month. The Nikkei was unchanged, while the Shanghai Composite shed 0.2% and the Hang Seng climbed 0.8% higher. Data from across the pond were mixed. Eurozone producer price inflation matched expectations in August, with the PPI up 0.1%, and a 0.2pp rise in the unemployment rate the same month to 8.1% also matched expectations. Similarly, the September Markit Eurozone Manufacturing PMI was left unrevised from the flash estimate at 53.7, matching consensus. The index for Germany saw a small surprise downward revision to 56.4, but the index for France saw a surprise upward revision to 51.2. The CIPS/Markit UK Manufacturing PMI saw a surprise, slight downward revision from the flash estimate, to 54.1. The FTSE 100 was up 0.6% as of this writing, while the CAC 40 had strengthened 0.9%, and the DAX had added 0.2%. Futures for the major US stock market indexes were seeing larger gains, of 0.9% for the Dow and S&P 500, and 1.3% for the Nasdaq.
The complex settled mixed on Wednesday, featuring a narrowed gasoline crack and a wider ULSD crack, consistent with weekly inventory data from the EIA. WTI gained 93 cents, settling at $40.22/mmBtu, and EIA data were supportive, as was trade in US equities. Brent crude, meanwhile, slipped 8 cents lower to close at $40.95/bbl. RBOB futures shed 9 points, settling at $1.2008/g, while ULSD (HO) jumped 3.64 cents higher for a settlement price of $1.1454/g. According to Platts, ULSD and ULSHO barge differentials at New York Harbor weakened by 60 points each, to -0.10c/g and -5.85c/g, respectively with the new futures front-month, while HSHO barge differentials jumped 1.80 cents higher to -11.70c/g. Spot propane prices, per Platts, strengthened yesterday. Mt. Belvieu LST prices rose by 25 points to 50.500c/g and non-LST prices jumped 50 points higher to 50.500c/g. Conway spots added 25 points, hitting 47.750c/g. The gains came despite bearish weekly EIA inventories.
Natural gas futures fell 3.4 cents, settling at $2.527/mmBtu yesterday, with a loosening expected market balance next week and a weaker two-week degree day forecast. The EIA is due to release its weekly natural gas storage report for the week ended September 25 this morning, and a Reuters poll of analysts calls for a 79bcf injection. This would be just above the 78bcf five-year average, but well below last year’s 109bcf jump. The latest 1-5 day ECMWF outlook sees mostly below-normal temperatures for the Midwest and the East Coast, save for some parts of New England. The 6-10 outlook is less supportive, with more mixed temperatures in the Midwest.