Forex Marketz Daily Forex News – Fully Markets Update
On Monday, the price of Brent crude fell as we saw manufacturing growth slowing in the European Union (EU) and with China. This is a time when supply remains high and we have production risks in Libya, where the government no longer controls much of their capital city.
The manufacturing numbers in the EU slowed more than expected last month. Factory activity in several of their key countries, like German, France and Italy, appears to be faltering. French output is falling at its fastest pace in 15 months. China’s factory growth is now at a three month low in August and their huge construction sector is also slowing down. This is raising investor tensions over the outlook of key commodities, like crude oil. The demand for diesel has been pressured to the downside as construction activity slows. This is linked to the recent property market correction which should continue for some time.
Brent crude price was nearly fifty cents lower at $102.72 on Monday and by close of business at $95.86 a barrel. This came despite U.S. markets being closed for the Labor Day holiday. Good new, prices seem to have stabilized now. However we have key risks going on that will effect near term recovery. Exports of Libyan sweet crude are growing. An increase in volumes of crude are being put into storage. This will put downward pressure on price. We have seen production, of oil, in Libya, increase over the last several month rising to 700,000 barrels per day. This puts production nearly 50,000 barrels per day higher than last week.
However, recent news reports that the rebels have taken over many of the ministries and state institutions in Tripoli, the capitol of Libya, is now raising questions whether they can keep production levels up. In Iraq, Kurdish forces are fighting Islamic State (IS or ISIS) terrorists in order to break ISIS control of a town in northern Iraq. The U.S. has also been carrying out air strikes in the area. Even with all of this, exports of oil from Iraq’s southern oil port are unaffected.
Let us turn to Russia where President Vladimir Putin is calling for talks regarding statehood for the southern and eastern Ukraine. His counterpart, Ukraine President Petro Poroshenko has said his country is close to war with Russia. This could result in even more sanctions against Russia which is the biggest oil producer in the world. Until now, this threat of new sanctions, has not affected energy supplies or the price of crude oil.
All of this geopolitical tension has given crude oil prices some support. Will this change soon? Could prices drift higher if demand is suddenly throttled? Absolutely. When this happens traders will react and send the price of crude higher.
