LONDON (Commodity Online): Oil prices slipped again on Monday, with December Brent settling at $109.56/bbl, down 35 cents on the day, while the equivalent WTI contract shed 64 cents to settle at $93.19/bbl, although both contracts ended higher on the month, said Barclays Capital in a research note.
Macroeconomic indicators remain mixed, with early activity figures from China for October sending contradictory signals. China's NBS PMI fell to 50.4 last month, below consensus of 51.8, but the HSBC China PMI moved above 50. This follows a modest decline in the Chicago PMI and Korean exports. While the EU summit last week managed to contain some market anxieties, missing details suggest that troubles are far from over, in Barclays view.
Against this fragile backdrop, we expect market attention to remain focussed on macro data, sidelining fundamentals. Much like the macroeconomic data, oil demand indications too remain mixed, as was showcased by the latest data on air traffic from the IATA. In September, total passenger air traffic increased y/y by a solid 5.6%, a pick up in growth m/m, and it continues to grow on a strong base and remains in far healthier conditions than those seen in late 08/early 09.
International passenger traffic increased strongly by 6.6%, with growth spread out fairly uniformly across all the key markets (Latin America was the strongest performer with a y/y increase of 10.6%), with the exception of the US which saw muted growth of 1.2%. The domestic market recovered from August’s slowdown too, increasing y/y by 3.8%. While India continues to dominate the domestic market (up y/y by 18.4%), Brazilian growth remained robust too (up y/y by 7.5%), while Chinese air traffic growth improved markedly (up by 9.7% y/y). The US domestic market rebounded from negative growth territory and was up by 1.6%. In line with the slowdown in Japanese oil demand, Japanese passenger traffic also stopped its trend of improvement, lower y/y by 14.5%.
Freight was once again the weak point in the data, with total freight market falling y/y by 3%. While freight markets have weakened in tandem with a slowing economy, an extremely high base aided by a strong recycling cycle last year also makes the comparison slightly distorted. Moreover, Asia- Pacific carriers are the largest players in air cargo and have been the hardest hit with a 6.3% decline y/y as a result of the Japanese tsunami and earthquake outweighing robust growth in other parts of the region.
