Oil Markets
WTI rebounded towards $ 56.00 before markets chilled back toward.54.40 after traders were left mulling US inventory data which continued to show significant supply builds and comes on the back of sustained record US crude oil production. And for record-keeping purposes and confirming what we already knew, Saudi Arabian oil production surged to a record 10.8-10.8mn bpd in early November thanks to stronger-than-usual demand ahead of Iran sanctions.
Another reminder why the outlook for oil prices remains skewed lower into years end. So, what can we expect when the market pivots to US pipeline bottlenecks getting alleviated in 2019? The entire notion of a tight global spare capacity argument goes down the well.
Regardless of what side of the fence you are on what’s unmistakable to oil patch veterans is just how mind-bogglingly bearish the Oil community has become on such short order.
And as Brent spreads move from backwardation to contango its unlikely buy only funds or even passive investors for that matter will be attracted to the markets anytime soon. Not to mention the fact President Trump appears to have Saudi Arabia over the proverbial ” oil barrel” dealing the Khashoggi fiasco
Currency markets
USD pulled back after Wednesday pre-holiday scrum while NY G-10 trader had Thanksgiving dinner on their mind as major G-10 currency pairs were confined to a small ten pip trading range post-London close. Since we are entering what is affectionally referred to as “turkey day” barring any unsightly headlines, near-term trading ranges will likely be honoured during the Asia session.
US durable goods disappointed which triggered a knee-jerk move lower on USDJPY and US yields. But the data was not a big enough print to rattle the Feds, but none the less it’s a subtle reminder that USD will remain extremely sensitive to lower than expected US economic data prints despite the Fed on track to raise interest rates in December
Equity markets
While the equity market carnage somewhat abated but ultimately the recovery flatlined before the S&P headed south into the close. All but suggesting this half-hearted recovery effort should not be confused with anything other than pre-holiday scramble doing little more than what amounted to chasing oil prices up and down. But with the overwhelming consensus suggesting we’re not even close to being out of the weeds yet, it’s down to the US retail sector to provide a lifeboat to investors as the markets pivots to Black Friday shopping performance which will be the ultimate litmus test of US consumer confidence heading into the holiday season. Let’s see if the US consumer opens their purse string and put all this tax savings into play. But as I’ve been reminded countless time before, never underestimate the power of the US consumer.
Malaysia
Expecting a relatively quiet session as foreign investors will be sidelined until next week due to the US Thanksgiving holiday effect. The overall backdrop has not changed, and the markets remain incredibly bearish as macro sentiment is weak.
