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US Data Dump Ahead of Thanksgiving Holiday

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

European stocks have erased earlier gains to trade slightly in negative territory on Wednesday and US futures are pointing to a similar open ahead of tomorrow’s Thanksgiving bank holiday.

This could have been a relatively uneventful week as a result of tomorrow’s US bank holiday as traders fully embraced the time off with family, turning the celebrations into a long weekend or even a full week away from the desk. But instead, it’s been quite the opposite, as Powell’s renomination sent shockwaves through the markets and the few remaining lira bulls abandoned ship as the currency sank to new lows.

While we’re still seeing the effects of that and the ripples will continue to spread into year-end, especially around the December Fed meeting, we may start to see some calm return to most corners after today. But with a plethora of pre-Thanksgiving data out first, there’s still time for a few more shocks before then.

GDP, durable goods, jobless claims, PCE inflation, income, spending, inflation expectations, new home sales and consumer sentiment are among the releases coming from the US. And that’s before we get the FOMC minutes from earlier this month later in the session.

The pick of the bunch is surely the PCE data, given the trend we’ve seen in the inflation readings recently and pressure that’s mounting on the Fed to tighten monetary policy faster. The minutes will be interesting but a lot has happened in the last few weeks, to the extent that I wonder what we can actually learn of any significance.

Needless to say, we’ll have a much clearer image of the economy by the end of today which will feed into the now hawkish expectations ahead of next month’s meeting. The transitory argument alone just doesn’t resonate anymore so aside from the dot plot, the Fed’s language next month will set the tone for 2022.

Oil flat after SPR move

Oil is looking a little flat today after bouncing back well on Tuesday following the coordinated SPR announcement. Oil consuming countries fighting back makes for an interesting story and may score Biden some much-needed political points ahead of the midterms but as we’ve seen from the market reaction, it’s certainly no game-changer.

And I’m not convinced it was ever intended to be. The decision has ticked a few boxes and if they’ve played it well, won’t ruffle too many feathers within OPEC+ and trigger a response. They still hold all the power and could quite easily counter. Rather than engage in a price war though, I wonder if the group will allow them this small win and move forward as planned as prices remain elevated.

Gold finds its feet ahead of US data

Gold has been pummelled this week but it appears to finally be finding its feet a little ahead of today’s feast of US data. The yellow metal had benefitted greatly from a combination of higher inflation and central bank pushback but the readjustment in interest rate expectations in the markets has brought it back down to earth with a bang.

There could still be plenty of action ahead today given the quantity of data and the Fed minutes ahead of the US holiday when gold will find its feet once more. But how it performs into year-end will ultimately depend on whether the Fed falls in line with market expectations next month.

Bitcoin stable but further downside may come

Bitcoin has stabilised over the last couple of days after finding support around $55,500. The move below $58,000 was a blow and it could fall further still in the near term. It’s hard to imagine the correction being too severe though given the momentum we’re seeing in the space at the moment and the excitement it’s generating.

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Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand

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Crude oil

Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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