Energy Commentary

Monday, September 30, 2019

Today’s Market News

  • Chinese factory activity expands in September: Despite economists’ expectations of a dip, the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) has risen from 50.4 in August to 51.4 in the current month and represents a second consecutive month of expansion in China. The key reason for the acceleration here is a rebound in domestic demand even as new export orders fell for a fourth straight month considering U.S.-China trade war. Yet, analysts view third-quarter growth to barely attain lower end of Beijing’s full-year target of 6.0-6.5%.
  • Russian oil output declines in September: For the first 29 days of the month, oil output here has been 11.24 million barrels per day (bpd) compared to 11.29 million bpd in August. Even though there has been a small decline, it is still higher than the 11.17-11.18 million bpd they should be at considering the deal between OPEC member states and other producers where Russia had agreed to a 228,000 bpd cut per October 2018 baseline.
  • Saudi Arabia weighs in on Iran: During “60 Minutes” interview, Saudi Arabia’s crown prince Mohammed bin Salman warned of “unimaginably high numbers” for oil prices if the world doesn’t come together and deter Iran. He did indicate a preference for political solution rather than a military one.
  • Market Opinion: The market is beginning the week negative for both crude and products as lack of progress on trade war is driving it lower. Last week closed out quite volatile for crude considering conflicting U.S./Iran sanctions and recent lows of $54 provides support for WTI crude. For ULSD distillates, the 200 Day Moving Average (DMA) of $1.9255 is again being tested just as it has been in each of past four sessions. If settle below this level, a move into the $1.80’s would be expected.

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