- U.S. Factory Output Declines as Harvey Hits Refining, Chemicals
U.S. factory output declined in August as Hurricane Harvey curtailed oil refining and chemical production, a Federal Reserve report showed Friday.
Highlights of Industrial Production (August)
- Factory output fell 0.3% m/m (est. 0.3% gain) after an upwardly revised 0.4% increase
- Total industrial production, which also includes mines and utilities, decreased 0.9% m/m (est. 0.1% rise) after no change, revised from a 0.1% drop
- Harvey reduced rate of change in factory output and industrial production each by about 0.75 percentage point, Fed says
- Capacity utilization, measuring the amount of a plant that is in use, fell to 76.1% (est. 76.7%) from 76.9%
The report showed manufacturing may have increased without the effects of Harvey, which struck the Gulf Coast of Texas in late August. The Fed issued a technical note saying it made some assumptions about output in affected areas when actual data weren’t available, using procedures similar to previous major weather events.
Output got a boost from automobile production, which rose 2.2 percent, the first increase in four months. Vehicle demand has been cooling since the start of the year, and the Fed report compares with industry figures showing August sales of cars and light trucks posted the weakest annualized pace since early 2014, in part reflecting the hit from Hurricane Harvey.
Manufacturers are likely to see delays in supplier deliveries, a shortage of some inputs, and higher costs for materials in the aftermath of Harvey and Irma, economists have said. At the same time, history shows that economic activity that’s initially subdued due to major storms tends to get a lift later amid rebuilding.
Outside of hurricane-related volatility, manufacturing is expected to keep expanding, though an acceleration is unlikely without bigger gains in household demand and business investment. An improvement in overseas markets may boost production linked to exports, while a pickup in energy prices would also help producers.
The Institute for Supply Management’s manufacturing index released earlier this month showed factories ramped up in August to the fastest pace of expansion in six years, with gains in backlogs signaling assembly lines will keep humming in coming months.
- Utility output fell 5.5 percent after rising 1.5 percent the prior month
- Excluding autos and parts, manufacturing output fell 0.5 percent
- Mining production fell 0.8 percent; with oil and gas well drilling dropping 4.8 percent
- Production of consumer goods fell 0.7 percent; output of business equipment dropped 0.4 percent
- Machinery production fell 1.4 percent
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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