Crude oil eased a bit more this morning trading at 91.87 as lackluster global data continues to weigh on the commodity. Chinese (HSBC) data missed targets this weekend weighing heavily on crude oil with China the leading energy user in the world. The official PMI data showed manufacturing in expansion and a slight improvement, while the HSBC data, which tends to be more reliable showed manufacturing in contraction and below expectations. The divergence is the main topic of market conversation today. Especially after last month’s trade balance data showed numerous fictitious orders in the totals.
Crude oil prices declined on Friday, suffering losses for the week and month, as pessimism among traders over the outlook for energy demand pushed prices below $92 per barrel. Organization Petroleum Exporting Countries’ has kept its oil production target unchanged at 30mn barrels per day, despite worries about energy demand and rising US output.
Over the week comments from the ECB could support a slight bump in prices. The recent flood of money pumped into markets by the world’s major central banks to boost growth must not lead to a rise in protectionism, European Central Bank Executive Board member Benoit Coeure said. While Mr. Draghi seemed to indicate that a rate cut was not on the table but stabilization would be the main goal of the bank. The euro zone economy is on track for a recovery later this year driven by the European Central Bank’s loose monetary policy and demand from abroad, the bank’s President Mario Draghi said.
Today, Germany and the eurozone will release their PMI data, which are likely to improve. These factors should support the euro and pressurize the dollar and could have an effect on energy prices.. In the North American session, a few key economic releases from the US are expected. These are expected to decline and may have a negative impact on the dollar and oil.
Natural gas declined below the key $4 per mmbtu level, on concerns that mild weather to start the summer will lower US fuel demand. Natural gas is trading at 3.958 in the red this morning, down by 29 points. The demand for natural gas in the residential/commercial sector tumbled down in recent weeks as the weather is heating up. On the other hand, consumption in power sector rose as leading utilities companies continue to use their natural gas stockpiles for electricity. But as their stockpiles will dwindle in the coming weeks, they are likely to shift back to coal. Considering the high price of natural gas, compared to last year, it’s more likely that utility companies will turn back to coal. In such a case, the demand for natural gas in the power sector is also expected to fall. On the other hand, natural gas production continues to slowly rise. If these trends will persist in the coming weeks, they could lead to a further drop in prices.