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Weekly Crude oil inventories 3.291M vs 2.225M estimate

  
Analysis, Crude

Private data showed a 3.59M build for crude

The EIA is now with their weekly inventory data.  This comes after the private data showed crude oil inventories showed a higher build of 3.59M while gasoline inventories showed a draw of -0.55M (vs -1.33M est).

  • Crude oil inventories 3.291M versus estimates of 2.225M
  • Gasoline inventories 0.104M vs estimates of -1.33M.
  • Distillates inventories 2.16M vs estimates of -1.443M
  • Cushing inventories -0.916 M versus previous of -3.899M
  • inventories in US strategic petroleum reserve off 1.6 million barrels to 612.54M
  • refining utilization 1.200% versus expected 0.6%. Previous 0.4%
  • crude oil production 11.5M versus 11.3M previously.  +1.77%
The private data released near the close of trading yesterday showed:
  • Crude oil +3.59M
  • Gasoline -0.55M.
  • Distillates, +0.57M.
  • Cushing,  -0.88M

PBOC says that 140 million people have opened accounts for digital yuan

  
  Analysis

China is pushing the digital yuan as the main alternative to cryptocurrencies

The figure may seem little but is significantly higher from the roughly 20 million wallets reported back in June here. The digital yuan was rolled out to users as part of government-led trials since last year and with wider adoption anticipated over time.
There is still a long way to go but as China looks to clamp down more on cryptocurrencies in general, expect them to push forward with a stronger agenda in promoting the use of the digital yuan among the public.
At the same time, one can expect more barriers to be put up against the likes of Alipay and WeChat pay – which we are already seeing here.

Welcome to Fed day

  
  Analysis

The FOMC meeting is the key focus in the day ahead

Fed
As such, one can expect quieter tones to prevail in the run up to that and in the European morning session ahead. As for what to expect from the Fed, I outlined some thoughts earlier in the week as per below:

I believe this one will be a bit more straightforward. However, the market reaction may not quite be as what the Fed may want it to be perhaps.

The recent flattening of the yield curve perhaps suggests something is awry with the financial outlook – one way or another – and even if the Fed plays its cards right, we may still see the trend continuing over the next few weeks.

The market is expecting a taper announcement by the Fed this week and they will surely deliver on that. The question then becomes how far are they willing to go to make clear that the taper process is not going to be correlated or isn’t going to translate immediately to rate hikes going into next year.

In that lieu, I would expect the Fed to reaffirm that they can opt to delay or slow down the taper process depending on market conditions but that will largely be semantics.

At the end of the day, the Fed is familiar with all this bullying and so is the market. I reckon that might not change until policymakers offer up a firm voice on the matter.

It’s all about seeing how much the Fed wants to push back against rate expectations, very much similar to the RBA situation going into yesterday’s meeting decision.

Latest Reuters poll show analysts still looking for higher currencies against the USD

  
  Analysis

Reuters poll of nearly 70 foreign exchange analysts showed continuing views that nearly all major currencies will be trading higher than current levels in the next 12 months

Reuters add:
  • a view these analysts have held for years, even as the dollar drifted higher.
Says the report:
  • currencies offering higher interest rates were expected to outperform
  • The British pound, the New Zealand dollar and the Canadian dollar were expected to gain 2.9%, 1.6% and 2% respectively. 
  • the euro and the Japanese yen, were not forecast to claw back their year to date loss of 5% and 9% over the next 12 months

RED ALERT ::::: China coronavirus – around half the flights to and from Beijing were cancelled Tuesday

  
Analysis, COVID-19

‘Zero Covid’ policy persists in China – this report via CNBC on the outbreak in Beijing:

  • About half the flights to and from Beijing city’s two airports were cancelled Tuesday,
  • Local authorities are on high alert after a handful of locally transmitted coronavirus cases over the weekend indicated the latest spike in cases might be spreading beyond just a few regions.
  • Beijing’s health commission announced Monday that residents who had left the city for business trips or leisure trips to areas with confirmed cases should “postpone” returning
The report is here for more.
The mid-year outbreak of the virus in China resulted in widespread disruption to the economy, if the ‘zero’ policy can stamp out the spread quickly these will be limited this time around but the risk is further spread and tightening of movement again.

More on China urging its people to stockpile food

  
  Analysis
Long story short on this, as posted yesterday, is
  • China’s Commerce Ministry issued a directive telling families to stockpile essentials
  • supply chain are hampered by heavy flooding and COVID-19 lockdowns
The wider media have now picked up on the story with some fevered speculation that it even pre-empts an invasion of Taiwan! (A far-fetched worry that one).
This is a worrying development in China. The concern over supply chains is real, and recent history has shown Chinese authorities have responded in a ham-fisted way to a recent example, the energy crisis. Earlier in the year Chin banned imports of Australian coal and authorities have stood idly by as the price of coal skyrocketed, forcing electricity producers to scale back on purchases (when they could source coal at all) and enforce rolling blackouts impacting both the domestic and industrial sectors. (There are other factors in play but the spiteful moves on coal imports are a biggie. Let’s hope China manages this latest disruption or winter is going to be long and ugly).
Post on this from yesterday the early heads up on a fearful development in China:
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