Will China PMIs oil dip further for energy?

Energy stocks in Asia are set to resume their declines this week, judging from their lower opens in Australia.

Oil pump jack
Source: Bloomberg

In the morning trade session, the Australian Securities Exchange (ASX 200) fell around 0.8%.

With oil prices continuing to slide further, it’s no surprise that the energy sector was the biggest drag on the index, down around 5%.

The usual suspects such as Santos, Oil Search, Woodside, and Drillsearch were among the main culprits.

With oil prices now under $70 per barrel, all eyes are now on the next potential support of $60, according to forecasts by research firms such as Nomura and Deustche Bank.

That’s also seen as the price point where US shale oil producers will start to hurt and perhaps see some cutbacks on their supply.

With macroeconomic fundamentals largely unchanged, the downward bias on energy prices will remain. For now, the most likely factor that could change the equation would be a significant uptick on the demand front.

Any signs of the global economy gaining traction will provide some support for oil. Conversely, any disappointing indicators will accelerate its price decline.

On the radar today, we’ll be watching out for Chinese manufacturing data in the forms of official manufacturing PMI for November, 9am Singapore time (SGT) and HSBC manufacturing PMI, 9.45am SGT. Market expectations are for both prints to show a softer reading at 50.5 and 50.0 respectively.

Another potential catalyst will be US ISM manufacturing PMI numbers, due to come out later tonight at 11pm SGT, where the consensus forecast is for a slight dip to a reading of 58.0 from 59.0. Non-farm payroll numbers at the end of the week will also be closely watched for further signs of an improving labour market.

Ahead of the Hong Kong open

With renewed clashes over the weekend between Hong Kong’s pro-democracy activists and police, we could see a dent on investor sentiment in the interim.

Energy-related stocks such as CNOOC, Petrochina, and Sinopec will likely be under further pressure and weigh down the Hang Seng Index.

We are calling for the Hang Seng Index or Hong Kong HS50 to open 0.4% lower at 23876.16 points.

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