Markets

China Caixin manufacturing PMI Climbs to 51.9 in December

Published

7 years ago

January 3, 2017

China Caixin manufacturing PMI Climbs to 51.9 in December

The China Caixin manufacturing Purchasing Managers’ Index (PMI) climbed in December, marking its fastest rate of improvement in three years, figures released Tuesday showed.

In December, the Caixin PMI reading came in at 51.9, up from November’s 50.9. A reading above 50 indicates expansion, while a reading below signals contraction.

That compared with China’s official manufacturing PMI, released Sunday, coming in at 51.4, down slightly from November’s 51.7.

The official non-manufacturing PMI, which takes a reading on the services sector, came in at 54.5 in December, down from November’s 54.7.

The official figures tend to focus on larger companies, while the private Caixin data focus on smaller and medium-sized firms.

The data likely indicated that the mainland economy, which had been expected to slow, was stabilizing.

“A further rise in production at Chinese manufacturers supported the higher PMI reading in December. Notably, the rate of output growth accelerated to a 71-month high, with a number of panelists commenting on stronger underlying demand and new client wins,” the Caixin data statement said.

“Data indicated that improved domestic demand was the key driver of new business growth, however, as new export sales were unchanged in December.”

While the manufacturing PMI data tends to be more closely watched, China’s pivot toward domestic consumption and away from manufacturing- and investment-led growth means the service sector, which includes consumer industries such as real estate, retail and leisure, has become the majority of the mainland economy. It is also a key barometer of consumption, accounting for more than 50 percent of gross domestic product (GDP).

Concerns have persisted over the mainland economy’s health, as private-sector debt has surged even as the amount of growth from additional debt has declined.

But the economy in recent months has received a fillip from a pickup in the property sector.

The surprise win by U.S. President-elect Donald Trump has also been a concern for the mainland’s export-oriented economy.

On the campaign trail, Trump repeatedly accused China of manipulating its currency in order to give its exports an advantage over U.S.-made goods, and he threatened to slap a tariff of up to 45 percent on Chinese imports.

On Tuesday, he upped the ante on anti-China rhetoric, saying via Twitter that “China has been taking out massive amounts of money & wealth from the U.S. in totally one-sided trade, but won’t help with North Korea. Nice.”

But the latest Caixin data showed that the new export orders index was at the neutral 50.0 level, with 90 percent of the survey’s respondents saying there was no change in new business from overseas.

“A number of panelists commented on relatively muted foreign demand in the latest survey period,” the survey statement said.

But it wasn’t clear how sustainable the manufacturing pickup might be.

Dr. Zhengsheng Zhong, director of macroeconomic analysis at research firm CEBM, said in the Caixin statement that the mainland’s manufacturing economy continued to improve, but he added, “it is still to be seen if the stabilization of the economy is consolidated due to uncertainties in whether restocking and consumer price rises can be sustainable.”

Other economists were also doubtful of the sustainability of the pick up.

Andy Xie, an independent economist and former managing director at Morgan Stanley, told CNBC’s “Squawk Box” on Tuesday that he wasn’t optimistic the bump up could be sustained.

“Industrial production has been on an upswing for about six months or so, mainly because of the surge in property sales last year. Property developers and local governments got money and they’ve been spending the money,” he said, noting that for the past several years, every economic cycle has been driven by the property market.

“It usually doesn’t last very long,” he said.

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Samed Olukoya

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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Crude Oil

Dangote Mega Refinery in Nigeria Seeks Millions of Barrels of US Crude Amid Output Challenges

Published

3 days ago

May 16, 2024

Samed Olukoya

The Dangote Mega Refinery, situated near Lagos, Nigeria, is embarking on an ambitious plan to procure millions of barrels of US crude over the next year.

The refinery, established by Aliko Dangote, Africa’s wealthiest individual, has issued a term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland crude for a duration of 12 months, commencing in July.

This development revealed through a document obtained by Bloomberg, represents a shift in strategy for the refinery, which has opted for US oil imports due to constraints in the availability and reliability of Nigerian crude.

Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, emphasized the allure of US crude for Dangote’s refinery.

Georgieva highlighted the challenges associated with sourcing Nigerian crude, including insufficient supply, unreliability, and sometimes unavailability.

In contrast, US WTI offers reliability, availability, and competitive pricing, making it an attractive option for Dangote.

Nigeria’s struggles to meet its OPEC+ quota and sustain its crude production capacity have been ongoing for at least a year.

Despite an estimated production capacity of 2.6 million barrels a day, the country only managed to pump about 1.45 million barrels a day of crude and liquids in April.

Factors contributing to this decline include crude theft, aging oil pipelines, low investment, and divestments by oil majors operating in Nigeria.

To address the challenge of local supply for the Dangote refinery, Nigeria’s upstream regulators have proposed new draft rules compelling oil producers to prioritize selling crude to domestic refineries.

This regulatory move aims to ensure sufficient local supply to support the operations of the 650,000 barrel-a-day Dangote refinery.

Operating at about half capacity presently, the Dangote refinery has capitalized on the opportunity to secure cheaper US oil imports to fulfill up to a third of its feedstock requirements.

Since the beginning of the year, the refinery has been receiving monthly shipments of about 2 million barrels of WTI Midland from the United States.

Crude Oil

Oil Prices Hold Steady as U.S. Demand Signals Strengthening

Published

3 days ago

May 16, 2024

Samed Olukoya

Oil prices maintained a steady stance in the global market as signals of strengthening demand in the United States provided support amidst ongoing geopolitical tensions.

Brent crude oil, against which Nigerian oil is priced, holds at $82.79 per barrel, a marginal increase of 4 cents or 0.05%.

Similarly, U.S. West Texas Intermediate (WTI) crude saw a slight uptick of 4 cents to $78.67 per barrel.

The stability in oil prices came in the wake of favorable data indicating a potential surge in demand from the U.S. market.

An analysis by MUFG analysts Ehsan Khoman and Soojin Kim pointed to a broader risk-on sentiment spurred by signs of receding inflationary pressures in the U.S., suggesting the possibility of a more accommodative monetary policy by the Federal Reserve.

This prospect could alleviate the strength of the dollar and render oil more affordable for holders of other currencies, consequently bolstering demand.

Despite a brief dip on Wednesday, when Brent crude touched an intra-day low of $81.05 per barrel, the commodity rebounded, indicating underlying market resilience.

This bounce-back was attributed to a notable decline in U.S. crude oil inventories, gasoline, and distillates.

The Energy Information Administration (EIA) reported a reduction of 2.5 million barrels in crude inventories to 457 million barrels for the week ending May 10, surpassing analysts’ consensus forecast of 543,000 barrels.

John Evans, an analyst at PVM, underscored the significance of increased refinery activity, which contributed to the decline in inventories and hinted at heightened demand.

This development sparked a turnaround in price dynamics, with earlier losses being nullified by a surge in buying activity that wiped out all declines.

Moreover, U.S. consumer price data for April revealed a less-than-expected increase, aligning with market expectations of a potential interest rate cut by the Federal Reserve in September.

The prospect of monetary easing further buoyed market sentiment, contributing to the stability of oil prices.

However, amidst these market dynamics, geopolitical tensions persisted in the Middle East, particularly between Israel and Palestinian factions. Israeli military operations in Gaza remained ongoing, with ceasefire negotiations reaching a stalemate mediated by Qatar and Egypt.

The situation underscored the potential for geopolitical flare-ups to impact oil market sentiment.

Crude Oil

Shell’s Bonga Field Hits Record High Production of 138,000 Barrels per Day in 2023

Published

3 days ago

May 16, 2024

Samed Olukoya

Shell Nigeria Exploration and Production Company Limited (SNEPCo) has achieved a significant milestone as its Bonga field, Nigeria’s first deep-water development, hit a record high production of 138,000 barrels per day in 2023.

This represents a substantial increase when compared to 101,000 barrels per day produced in the previous year.

The improvement in production is attributed to various factors, including the drilling of new wells, reservoir optimization, enhanced facility management, and overall asset management strategies.

Elohor Aiboni, Managing Director of SNEPCo, expressed pride in Bonga’s performance, stating that the increased production underscores the commitment of the company’s staff and its continuous efforts to enhance production processes and maintenance.

Aiboni also acknowledged the support of the Nigerian National Petroleum Company Limited and SNEPCo’s co-venture partners, including TotalEnergies Nigeria Limited, Nigerian Agip Exploration, and Esso Exploration and Production Nigeria Limited.

The Bonga field, which commenced production in November 2005, operates through the Bonga Floating Production Storage and Offloading (FPSO) vessel, with a capacity of 225,000 barrels per day.

Located 120 kilometers offshore, the FPSO has been a key contributor to Nigeria’s oil production since its inception.

Last year, the Bonga FPSO reached a significant milestone by exporting its 1-billionth barrel of oil, further cementing its position as a vital asset in Nigeria’s oil and gas sector.