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Factory Output in U.S. Declines More Than Forecast in August

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Output at American manufacturers fell more than economists forecast in August, a sign the industry is having trouble finding its footing.

The 0.4 percent decline at factories was the biggest drop since March and followed a 0.4 percent increase the prior month, a Federal Reserve report showed Thursday. Economists called for a 0.3 percent drop. Total industrial output, including mines and utilities, dropped 0.4 percent, also a steeper decline than anticipated.

The data add to concerns sparked last week by a private survey of purchasing managers that showed manufacturing contracted last month. Any slowdown in U.S. or global demand would further worsen the outlook for producers, who are trying to recover from the energy sector pullback, bulging inventories and lingering effects of the dollar’s surge.

“There’s not a lot of evidence that manufacturing is turning around quickly,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Manufacturing is going to continue to struggle through the rest of the year, though it’s not likely to contract.”

The latest results are consistent with the Institute for Supply Management’s factory survey for August, which signaled a contraction, albeit for the first time in six months. Orders plunged, production was cut by the most since 2012 and employment fell, that report showed.

Fed Meeting

Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy. Fed officials, meeting next week, are weighing economic data to determine when to raise interest rates.

Economists’ estimates for factory output in the Bloomberg survey ranged from a decline of 0.5 percent to an advance of 0.4 percent. The previous month’s reading was revised from a 0.5 percent gain.

For total industrial production, the Bloomberg survey median called for a 0.2 percent decrease. The prior month was revised to a 0.6 percent increase after a previously reported 0.7 percent advance.

Utility output fell 1.4 percent in August, the biggest decrease since March, after rising 2.1 percent the previous month, the Fed report showed.

Mining production, which includes oil drilling, increased 1 percent, the fourth straight monthly gain that reflects stabilization in the price of oil and other commodities.

Capacity utilization, which measures the amount of a plant that is in use, dropped to 75.5 percent from 75.9 percent in the prior month.

The output of motor vehicles and parts increased 0.5 percent after a 1 percent gain a month earlier. Excluding autos and parts, manufacturing output declined 0.5 percent after increasing 0.3 percent the prior month.

Machinery production dropped 1.9 percent, and output of computers and electronics gained 1 percent. Construction materials fell 0.6 percent. Consumer goods production declined 0.2 percent, while output of business equipment decreased 0.4 percent.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Commodities

Nigeria’s Petrol Imports Decrease by 1 Billion Litres Following Subsidy Removal

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Nigeria’s monthly petrol imports declined by approximately 1 billion litres following the fuel subsidy removal by President Bola Ahmed Tinubu, the National Bureau of Statistics (NBS) reported.

The NBS findings illuminate the tangible effects of this policy shift on the country’s petroleum importation dynamics.

Prior to the subsidy removal, the NBS report delineated a consistent pattern of petrol imports with quantities ranging between 1.91 billion and 2.29 billion litres from March to May 2023.

However, in the aftermath of Tinubu’s decision, the nation witnessed a notable downturn in petrol imports, with figures plummeting to 1.64 billion litres in June, the first post-subsidy month.

This downward trend persisted in subsequent months, with July recording a further reduction to 1.45 billion litres and August witnessing a significant decline to 1.09 billion litres.

August’s import figures represented a decrease of over 1 billion litres compared to the corresponding period in 2022.

The NBS report underscores the pivotal role of the subsidy removal in reshaping Nigeria’s petrol import landscape with the Nigerian National Petroleum Company emerging as the sole importer of fuel in the current scenario.

Despite higher petrol imports in the first half of 2023 compared to the previous year, the decline in June, July, and August underscores the profound impact of subsidy removal on import dynamics, affirming the NBS’s latest findings.

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Crude Oil

Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO

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The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.

Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.

Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.

He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.

Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.

The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.

Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.

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Crude Oil

Oil Prices Rebound in Asian Markets Amid Red Sea Shipping Concerns

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Amid escalating attacks on shipping in the Red Sea and growing uncertainty regarding U.S. interest rate cuts, oil prices rebounded in Asian markets today.

Brent crude oil, against which Nigerian oil is priced, climbed by 24 cents to $82.58 a barrel while the U.S. West Texas Intermediate crude oil (WTI) rose by 21 cents to $77.25.

The rebound comes after both Brent and WTI contracts experienced a 1.5% and 1.4% decline, respectively, from their near three-week highs on Tuesday.

This decline occurred as the premium for prompt U.S. crude futures to the second-month contract widened to $1.71 a barrel, its widest level in approximately four months.

However, on Wednesday, the premiums slid to 4 cents a barrel.

Analysts suggest that oil futures have entered a relatively range-bound phase, with current prices reflecting a risk premium of $6-7 per barrel.

The situation could persist until the next significant development in the Gaza crisis, whether it involves a de-escalation through a ceasefire or a further intensification of the conflict.

Recent attacks on vessels in the Red Sea and Bab al-Mandab strait by Yemen’s Iran-aligned Houthis have heightened concerns over freight flows through these critical waterways.

Moreover, Washington’s veto of a draft UN Security Council resolution on the Israel-Hamas war has added to geopolitical tensions impacting oil markets.

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