Energy prices moved in a narrow range again last week, with returns on WTI, Brent and diesel of 0.5%, -0.5% and 0.2%, respectively. For a fifth consecutive week, WTI fluctuated within a range from US$43 to US$48 per barrel.
- On Friday the U.S. Bureau of Labor Statistics reported that the American economy had created 142,000 jobs in September, a figure that was 50,000 jobs short of analysts’ expectations. Furthermore, the new jobs figure for August was revised downward, from 173K to 136K. Even if this was initially seen as negative news for risky assets, their prices were up by the end of the day since investors had concluded that the U.S. Federal Reserve will not raise its key interest rate in 2015.
- On Friday Baker Hughes (NYSE:BHI) reported the largest weekly decline in its active drilling rig count since April. The figure fell from 838 to 809. In comparison, the company had reported close to 2,000 active rigs in October 2014. Clearly U.S. producers cannot maintain current production levels with oil selling at US$45 per barrel.
- The risk premium on oil due to geopolitical tensions in the Middle East rose last week as a result of expanded military operations in Syria. Russia began air strikes on September 30, stating that they were directed at Islamic State.
- Last week there was also some evidence of fear in the markets over hurricane season, with Hurricane Joaquin driving up energy prices on Thursday morning as it approached the eastern seaboard of the U.S. Recent weather reports nevertheless suggest that Joachim will have no effect on the region’s refinery operations.
To Read the Entire Report Please Click on the pdf File Below.