Gold Silver Reports – Crude Price Analysis for October 12, 2017 – Crude oil climbed further above USD 51 per barrel, as OPEC Secretary General reiterated that a rapid market rebalancing is underway, citing improved momentum in the global economy and oil-destocking over the summer.
Crude Oil producers in the U.S. cut output by 59% because of Tropical Storm Nate, according to the Bureau of Safety and Environmental enforcement. Saudi Arabia added to the bid tone as well, as it cut its November export allocations by 560k barrels per day.
Crude oil prices moved higher after recapturing resistance on Tuesday which is now seen as support near the 10-day moving average near 50.60. Resistance on crude oil is seen near the April highs near 52.05. Prices appear to be in a grinding uptrend, and negative momentum is decelerating. The MACD (moving average convergence divergence) index is printing in the red but the MACD histogram has a positive trajectory which points to consolidation. “
OPEC’s Secretary General said that the oil cartel might need to take “extraordinary” measures to balance the oil market next year. His comments are dire and a call to action as they mimic central bankers comments during the financial crisis. “There is a growing consensus that, number one, the re-balancing process is underway,” OPEC’s Mohammad Barkindo told reporters. “Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward.”
OPEC is generally vague on the specifics, but the working assumption is that the group will agree to an extension of the cuts until at least mid-2018, or perhaps even as late as through the end of the year. There’s been some discussion about deeper production cuts. Meanwhile, Saudi Arabia engaged in a bit of its own jawboning with the oil market, saying that it was taking “unprecedented” steps to cut its oil exports. Saudi Aramco said it would lower exports by 560,000 barrels a month next month, “the deepest customer allocation cuts in its history.”
The comments are consistent with the country’s longstanding pattern of trying to jawbone the market when it wants higher prices. Based on recent activity, the effort didn’t work. The fact that we did not get any significant strength from the Saudi news is rather disheartening for the bulls.
Of course, real cuts to oil exports will be felt if they are carried out, but after a few years of getting jerked around by every utterance from OPEC, the markets want to see proof in the pudding. Aggressive rhetoric no longer moves the market the way it did a year ago, so we’ll have to just wait and see what OPEC does at its November meeting.
Read More: Gold Price Forecast for October 12, 2017
The ironic thing is that while OPEC ponders more drastic action, there are signs that U.S. shale is actually not doing as well as everyone thought it would be at this point. Production is up, but signs of strain are showing. The rig count fell last week, after weeks of unimpressive gains. The slowdown suggests the industry is becoming more cautious, particularly with oil prices running out of steam.
Japan’s Core Machinery Orders Rose
Japan’s core machinery orders rose for a second straight month in August, beating market expectations. Cabinet Office data showed on Wednesday that core orders, rose 3.4% month over month in August. Orders from manufacturers jumped 16.1% month over month in August, driven by general-purpose production machinery such as machine tools, while service-sector orders grew 3.1%, led by orders for boilers and turbines.
The dollar eases on Weak Mortgage Numbers
U.S. MBA mortgage market index sank 2.1% in data released earlier, along with a 0.1% decline in the purchase index and a 4.2% drop in the refinancing index. The average 30-year fixed mortgage rate rose 4 basis points to 4.16% for the week ended October 6. The rise in rates came in the wake of the Fed quantitative tightening move in late September and heading into the storm-damaged payrolls report, which was relatively strong beneath the headlines. The housing sector remains somewhat in limbo after the hurricanes, though overall has been relatively underpinned as the Fed mulls its options for a resumption of rate hikes in December. – Neal Bhai Reports