Some things happened last Friday that continued to affect trade, or at least trade chatter, on Monday: China released some data relating to the status of their crude oil reserves, and the U.S. Bureau of Labor Statistics released the Non-Farm Payrolls report (NFP) for the month of August.
China, in the form of a statement posted to the country's National Bureau of Statistics website, released a number relating to their Strategic Petroleum Reserve (SPR) on Friday, saying that at the beginning of 2016 they'd had 31.97 million tons stashed away in their strategic reserves. Equaling around 234 million barrels, this would be the equivalent to just over a month's worth of China's crude oil imports at their current inflow rate. If this SPR number is correct, it would represent an increase of 43 million barrels since mid-2015; that is, if the mid-2015 number is also correct. This data, however, is not terribly telling, as it does not say either how much the country had in total, including both its government's SPR as well as its commercial reserves, nor does it say much about what they have in reserve now, the number reported being about 9 months old at the time of release. Nevertheless, it was something for the market analysts to chew on.
The U.S. Bureau of Labor Statistics also released data on Friday in the form of their monthly NFP or 'jobs report' for the month of August. Ahead of the report's release, Wall Street economists had been predicting we would see an increase of 180,000 jobs for the month. Instead, the increase reported was considerably smaller at 151,000 jobs, which left the national unemployment rate unchanged at 4.9%. This number, though somewhat disappointing to investors banking on higher numbers, definitely worked in favour of the price of crude oil by weakening the argument for an interest rate hike in the country. An interest rate hike would be unwelcome to oil as it would have a strengthening effect on the greenback; an increase in greenback value always winds up hurting the price of oil by making it pricier to buy in foreign currencies.
"In many respects," said Brad McMillan, chief investment officer at the Commonwealth Financial Network, "this report was a sweet spot. It's good enough that the economic growth continues, you're going to see the economic recovery move along. But it's not putting any more heat on the Fed to raise rates in September. In fact, it's going to dial them back a little bit."
On Monday, the G20 Hangzhou summit saw top producers from Saudi Arabia and Russia claiming that they had agreed to cooperate on stabilizing the oil market, including working towards an oil output freeze. Markets quickly jumped, but then remembered how quickly they had jumped last time they heard something which raised their output freeze hopes, and let themselves settle back down again.
Still, the day saw the price of oil go up, at least in Britain where November Brent crude gained 80 cents on Monday, settling at $47.63 a barrel on London's ICE Futures Exchange after spiking to $49.40 on Russia-Saudi news optimism; whereas October West Texas Intermediate (WTI) remained unsettled on Monday in observance of the nation's Labor Day holiday.
The day's main influences, the bears and bulls:
The Bears:
- Neither Bear nor Bull, China releases 9-month-old data about part of what they have in crude oil storage.
- Saudi-Russian claims of oil market cooperation resulted in only momentary bullish optimism, so this commentator calls it a bear in the end.
The Bulls:
- Continued effects of Friday's 'jobs report' showing less-than-expected improvement in American employment figures, expected to work against the US dollar by weakening the argument for an interest rate increase.
