Summary:
1- Oil prices erase gains for 2024 due to numerous factors affecting the market.
2- The US manufacturing purchasing managers' index rose from an eight-month low.
3- Divisions within the European Central Bank are increasing.
Oil prices erase gains for 2024 due to numerous factors affecting the market
Crude oil prices fell by 5% on Tuesday, September 3, wiping out the gains made so far this year. This decline followed comments from a Libyan central bank official indicating that an agreement to resume oil production in the country is nearing completion. With the possibility of more than 500,000 barrels of Libyan crude oil returning to the market daily, global oil consumption is back in focus. In recent months, economic concerns in major oil-consuming countries have affected market sentiment, compounded by numerous geopolitical worries and slight supply disruptions masking this anxiety. Looking ahead, the market is preparing for a gradual restoration of production, starting with an additional supply of 180,000 barrels per day in the coming weeks. Robert Yawger, director of energy futures at Mizuho Securities USA, stated, "A toxic mix of oversupply, declining demand, bearish technical indicators, and poor product fundamentals conspire to destroy crude oil."
The U.S. manufacturing purchasing managers' index rose from its lowest level in eight months.
The Institute for Supply Management announced last Tuesday that the manufacturing PMI in the United States recorded 47.2 in August, up from 46.8 in July, which was the lowest level since November. Employment improved, but the overall trend continued to indicate weak factory activity. The PMI remained below the 50 threshold for the fifth consecutive month, although it was above the 42.5 level that the Institute for Supply Management indicated suggests a macroeconomic expansion over time. Data related to manufacturing output and business equipment spending indicate that the manufacturing sector was generally in a recession. The new orders sub-index fell to 44.6, and production declined further, with the production sub-index also dropping to 44.8. Despite weak orders, manufacturers faced rising input prices, likely reflecting higher shipping costs. The survey measure of prices paid by manufacturers increased to 54.0 from 52.9 in July, suggesting that the contraction in goods may have currently reached its end, but it is unlikely to have a significant impact on inflation, which is slowing down. Employment continued to contract, but at a slower pace.
Divisions within the European Central Bank are increasing
Media reports citing sources indicate that policymakers at the European Central Bank are increasingly divided over economic forecasts, with some expressing concerns about a recession while others are worried about inflationary pressures, which could impact future monetary policy decisions. The sources noted that as the Eurozone enters a state of instability, future policy decisions may also become more complicated. It is unlikely that the divisions within the European Central Bank will affect the policy decision in September, as there is already a consensus on lowering interest rates that month. However, these divisions may influence how the President of the European Central Bank communicates the decision, which could alter market expectations for the meeting in October.
