To The Moon

Please find and follow my YT channel (nerdbull1669) for Daily SG and US Stock Watchlist. Do follow me as I share quality stock pick for Daily Watchlist. Last night 04 April 2023 Trading, the oil and energy sector stocks did not fare well, they were having a good run the previous day (03 April 2023) when OPEC+ Cut was announced. I believe we would need to look at the demand for oil and energy from large economics. Large demand would mean the price would likely trade upward for oil. I shall share in this article on my observation and how I analyze the relationship between weak manufacturing activities and oil price increase. China Manufacturing Activities China Manufacturing sector contribute to one-third of its economy. China is the world’s second-largest economy by value. Chinese Caixin Manufacturing PMI The Chinese Caixin Manufacturing PMI is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as an leading indicator for the whole economy. When the PMI is below 50.0 this indicates that the manufacturing economy is declining and a value above 50.0 indicates an expansion of the manufacturing economy. The Chinese Caixin Manufacturing PMI was reported to be at 50 in March, compared to February’s value of 51.6. Even though it is showing growth, but it has slowed down or weaker production activities is happening. The report said that this shows the vitality of manufacturing activities stayed largely at the same level as in February, yet the momentum of recovery has eased. China NBS Manufacturing PMI The country’s official PMI, China NBS Manufacturing PMI, announced by the National Bureau of Statistics last Friday, fell to 51.9 in March from 52.6 in February, as growth for new orders and new exports orders eased. China Manufacturing Activities Eased As we know that manufacturing does contribute to the demand for oil, with the manufacturing activities eased or weakened, demand for oil will eventually slowed down, oil prices likely will not rise any further. Let us look at the world’s largest economy, U.S. (United States Of America) U.S. Manufacturing Activities From the ISM data released on 03 April 2023, 70% of manufacturing GDP was contracting in March, down from 82%. But more industries contracted strongly last month. US ISM Manufacturing New Orders The ISM's manufacturing PMI has dropped to 44.3 in March from 47 in February, this is the lowest reading since May 2020. The forecast was at 49. The Manufacturing PMI has stayed below the 50 threshold(which is an indication of contraction) for 5 straight month. Even though manufacturing (which accounts for 11.3% of the U.S. economy) is continuing to grow moderately. U.S. Manufacturing Activities contracted With the new manufacturing PMI data, it show that U.S manufacturing activities has contracted. But I would say the demand for oil has dropped due to the reduction in new order, even though the manufacturing sector has expanded. Oil and Energy Sector Stock Price as of 04 Apr 2023 As we may know when the output cut was announced on Sunday, the oil and energy stocks have make very good gain and the crude oil price went up as well. But last night trading (04 Apr 23), the energy stocks in my watchlist was all negative (RED). The U.S. indexes did not fall more than 1% (e.g. S&P 500 fell only -0.58%) What could have caused this fall? Is it the demand for oil and energy from manufacturing sector? Will we see further increase of the crude oil price? Maybe it is too early to tell, but I always believe demand and supply have direct relationship. Supply cut when demand is low sound reasonable. Crude Oil and WTI Futures I also have a look at the Crude Oil WTI Futures chart, it was above $90 dollar when the last output cut was announced, it start dropping when the output cut was in effect from Nov 2022. During this time, U.S. manufacturing PMI was at 49.2, drop from Oct 22, the new orders also drop, and production also drop. This data is reported on 1 Dec 2022, and if you noticed from Nov-Dec 2022, crude oil prices did not increase any further, it actually goes down. So the output cut might not always move the oil price higher and further. Summary Oil price increase might be contributed by many factors, similarly demand and supply for oil might also demand on the global demand and activities that require them. Will we be seeing $90 per barrel again? I believe it will be when manufacturing really picked up strong, and demand for new order really accelerated. If we are not going to see a huge increase in the crude oil prices, I believe the stock prices of oil and energy might stay put for a while (maybe little gain). Appreciate if you could share your thoughts in the comment section on your view whether we are going to see further increase in oil prices due to output cut. Do like, share and comment on this article if you find this trading thought useful. @TigerStars appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts. Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.