Two hundred and thirty years after Benjamin Franklin wrote in a letter that he had invented bifocals, and the oil market is adjusting its focus once again. As the pendulum of market sentiment swings back towards the bears amid weak economic data and the hopeful return of Canadian production, oil prices are starting the week looking lower. Hark, here are six things to consider relating to the oil market today:
1) Japan kicked off a bearish economic tone overnight, with exports falling for a seventh consecutive month - driven by recent strength in the Yen. Imports fell a whopping 23.3%, the biggest decline since October 2009. As we know all too well, all paths lead back to energy, hence it is no surprise to learn that lower oil and gas prices contributed the most to the decline.
Japan's trade surplus was accordingly propelled to its highest level since March 2010. To top things off, preliminary manufacturing for May came in below consensus, and showing ongoing contraction since February.
2) Across to Europe, and both preliminary Eurozone manufacturing and services data for May were weaker than expected, although showing expansion. We've had a couple of bits of data out of Russia; retail sales were better than expected, but still down -4.8% YoY, while the unemployment rate edged lower to 5.9% in April. The main release of note from the U.S. has been the preliminary manufacturing PMI, which was below consensus, but clinging on in expansionary territory.
3) Chinese customs data show that Russian crude imports in April reached a record high at 1.17 million barrels per day. We can see in our ClipperData that waterborne Russian imports reached a record high last month, and volumes are continuing to arrive at the same pace so far in May; independent teapot refiners are likely continuing to fill their boots with crude locked in at lower prices earlier in the year. As the chart below illustrates, Chinese waterborne imports continue to rip higher:
4) The latest bout of CFTC data on Friday showed that speculative net-longs rebounded by their most since March; net longs increased by 14%, and are once again close to one-year highs. With a lot of emphasis last week on supply outages, the bulls have been encouraged back into the market:
5) French fuel shortages have now spread to almost a quarter of Total's gas stations as workers are striking in protest of a government labor law. Total operates five of France's eight refineries, and four of them have been affected by the strike, while three out of nine of the company's depots are blockaded. Despite this upheaval, an industry group said on Saturday that about 90% of the country's 11,356 gas stations are properly supplied.
6) Finally, Canadian crude production is set to return in the oil-sands region as cooler weather helps fire-fighting efforts. Eight work camps are reopening, while gas and power has been restored to 90% of undamaged structures in the city.