Forex Signals US Session Brief, Sep 16 – Sentiment Turns Negative Again on Saudi Oil Production Disruption
Skerdian Meta • 3 min read
Oil talks have been the highlight of the day today. Over the weekend, there was an attack on a Saudi oil processing facility at Abqaiq and the nearby Khurais oil field. That has reduced 5.7 million barrels of daily crude production, or 50% of the Saudi Arabia’s oil output. As a result, crude Oil prices surged when markets opened, with WTI crude jumping close to $63. The US already came to the conclusion that Iran was the attacker. Donald Trump responded that the US is locked and loaded, depending on the verification of the attack. Although, markets are not buying into the attack scenario, as safe havens remain unmoved after the small bullish gap overnight.
Oil retreated lower during the Asian and early European sessions on comments from Saudi officials that they could restore the production and refining capacity pretty fast, while OPEC+ eased fears of the global supply disruption. But, markets are not buying into it either. Recent reports show that Saudis might not be able to recuperate the refining and production capacities so fast and we might see a prolonged disruption. So, crude Oil has turned bullish again in the last few hours. The tensions in the Middle East have hurt the sentiment in financial markets also, as risk assets keep sliding lower, although safe havens are not taking advantage of it,which seems a bit weird.
The European Session
- Italian August Final CPI – The initial CPI (consumer price index) inflation reading for August in Italy was released a couple of weeks ago. Today, the headline CPI for August was expected to remain unchanged at 0.5%, but ticked lower to 0.4% MoM. Final CPI YoY also came in lower at 0.4% against 0.5% in the prelim reading. Final HICP remained flat at 0.0% in August, while final HICP remained unchanged at 0.5% vs YoY.
- ECB’s Stournaras –ECB governing council member, Yannis Stournaras commented on the upcoming ECB president Lagarde. He said that Lagarde will probably keep up ultra-loose policy and stimulus. There are strong monetary, economic and financial arguments for that. Benefits of taking action now exceeds to a large extent the costs. Stimulus package last week was necessary because inflation remains very low, inflation forecasts remain far below ECB’s objective. Countries which have the means to add budget stimulus should step up to the plate.
- Oil Commnets – The US secretary of energy, Rick Perry was speaking in Vienna this morning, saying that Iran attacked Saudi Arabia. He added that Iran must be held responsible and the attack on Saudi Arabia was an attack on the world energy system. Reuters reported, citing two sources familiar with the situation that Saudi Aramco’s full return to normal oil production volumes reportedly ‘may take months’.
- Brexit Talk – Earlier today we saw reports that the UK government is looking to challenge the Brexit delay bill in the courts. Later on, the UK government said to believe that Brexit delay bill is technically flawed. EU’s Juncker commented after the meeting with the UK PM Johnson. He said that Brexit talks with Johnson were good. He added that any solution must be compatible with the withdrawal agreement and underlined EU willingness to examine proposals to meet objectives of backstop.
The US Session
- US Empire State Manufacturing Index – The US Empire State manufacturing index has been weakening throughout this year. Although in the previous two readings we saw an improvement. But today’s report was expected to show another cool off from 4.8% to 4.1% in August. The actual reading missed expectations and instead declined to 2.0 points.
- Canadian Existing Home Sales – Existing home sales have been pretty strong in the last few months in Canada. The report released last month showed a 3.5% jump in sales during July. Home sales were expected to come up strong today for August, increasing by 1.3% and they came close to expectations, showing a 1.4% increase for last month.
- Where Did the Drones Attacking SA Came From? – It is not sure whether the attack came form Iran or from Yemeni rebels. The US surely wants to put the blame on Iran. Although, Houthi rebels from Yemen threaten fresh attacks on Saudi Arabia. Saudi-led Yemen coalition says attacks were not launched from Yemen.
Trades in Sight
- The trend is still bearish on the H4 chart
- The pullback higher this morning is complete
- Fundamentals point down
The trend remains bearish for EUR/GBP
EUR/GBP has turned pretty bearish for several weeks, since early August. The GBP is benefiting from the Brexit delay attempts from the UK opposition, while the Euro has turned bearish as the Eurozone economy keeps deteriorating and the ECB turns increasingly dovish. Today’s comments from ECB’s Stournaras that Lagarde will be a dove like Draghi have turned the Euro even more bearish and we expect this pair to remain so for the next few sessions.
Crude Oil is not as massively bullish right now as it was early this morning, but the pressure remains to the upside, still. The US is insisting that Iran launched the attacks on Saudi Oil production facilities, so it seems like more tensions are brewing up in the Middle East. If tensions escalate, then the risk is going to get damaged again in financial markets and safe havens will start receiving strong bids again after the two week pause.