(Sept 4): Crude oil prices remained stubbornly range-bound between US$45 and US$55 a barrel, despite a cut in US supply wrought by the onslaught of Hurricane Harvey in Texas. On Aug 29, the West Texas Intermediate crude for October contract traded at US$46.44 a barrel, while Brent crude traded at US$52 a barrel.

According to S&P Global Platts, roughly 2.33 million barrels per day of Texas refining capacity remained down. This represents 12.6% of US capacity. But the figure could be higher as refiners are underutilising their capacity. “Assuming the plants cutting runs are operating at 50%, that would put the total loss at 3.36 million bpd, or 18% of total US capacity,” it says in an Aug 29 report.

The Texas Gulf Coast is home to 4.9 million bpd of refining capacity, while the Louisiana Gulf Coast is home to 3.7 million bpd of capacity, according to the US Energy Information Administration. Total US capacity is 18.6 million bpd.

Still, S&P Global Platts notes that some oil operators at the onshore Eagle Ford Shale formation in South Texas have begun to restart wells and related midstream facilities. Marathon Oil Corp and EOG Resources were inspecting and assessing their Eagle Ford Shale operations in South Texas and have begun to restart production where possible. BHP Billiton reportedly said it was ramping up production in Eagle Ford. Before the storm hit, Eagle Ford was producing about 1.3 million bpd of oil, and 5.1 billion cu ft per day of natural gas, according to data from Platts Analytics’ Bentek Energy unit.

Amid the ongoing geopolitical tensions between the US and North Korea, gold prices broke past the psychological level of US$1,300 an ounce. On Aug 28, the precious metal traded at US$1,310.13 an ounce, a level last seen about 10 months ago. But it pared some gains to trade lower at US$1,309.23 an ounce on Aug 29.

OCBC Bank economist Barnabas Gan believes much of gold’s recent strength has been driven by the intensified geopolitical tensions between the US and North Korea. North Korea has again launched a missile, which flew over Japan before crashing into the sea. That prompted US President Donald Trump to say that “all options are on the table”.

Gan thinks gold could remain above US$1,300 an ounce for “some time”, as there are few signs of a quick resolution. “However, should tensions ease into the year, market watchers are likely to turn their focus back on market fundamentals, where global growth has evidently been rosier amid a recovery in risk appetite since the start of 2017,” he tells The Edge Singapore via email.

From a technical perspective, CMC Markets analyst Margaret Yang reckons gold could climb higher. In an Aug 29 market commentary, she says gold’s 10-day simple moving average is showing an upward slope pattern, while the Supertrend indicator is sloped downwards, suggesting more upside. In addition, the moving average convergence-divergence indicator suggests strong upward momentum.

Singapore dollar strengthens against US dollar

The Singapore dollar has continued to appreciate against the US dollar. On Aug 30, the Singapore dollar reached 1.3568, its strongest yearto- date. The currency pair was at 1.4507 at the start of 2017. “The key for the SGD strength is the weaker US dollar, based on a dovish Fed outlook, US political uncertainty and geopolitical tension [from] North Korea’s [military] escalation. The SGD is acting as a haven proxy as regional investors shy away from riskier local currencies,” Stephen Innes, Oanda head of trading for Asia-Pacific, tells The Edge Singapore via email.

While Innes thinks the SGD may continue to strengthen, he is of the contrarian view that the market is underpricing the possibility of a US interest rate hike at only seven basis points in December. US economic data has remained “quite robust”. An eventual rise in the key US wage metrics this week is possible as US employment continues to run “frothy”, he says.

Apple soars to new high

Shares of Apple hit an all-time high as the most valuable US tech company is reportedly set to unveil its 10th anniversary edition of the iPhone on Sept 12. The stock closed at US$162.91 on Aug 29, giving the company a market capitalisation of US$841.57 billion ($1.14 trillion).

According to news reports, Apple is expected to unveil three new iPhones, including a showcase model that celebrates the device’s 10th anniversary. It will be larger than previous models and come with facial-recognition technology and an edge-to-edge display.

Apple is also expected to launch a new Apple Watch that comes with an LTE cellular chip. This enables the wearable device to operate via its own connectivity. Users can send texts and emails and make calls independently from the iPhone.

Apple first launched its iPhone in 2007, paving the way for the dominance of smartphones. Over the last decade, the company rolled out multiple iterations of the iPhone, now said to be the best product the company has ever sold. In the quarter ended June, Apple reportedly sold 41 million iPhones.

The upcoming model will be a boost for Apple, according to research firm International Data Corp (IDC). It forecasts the company’s iPhone shipments to see nominal growth of 1.5% in 2017 from a 7% decline last year.

“From there, things only get better for Apple, as IDC anticipates the arrival of the iPhone 8 will spur a major upgrade cycle come 2018. Despite the new device launching later this year, IDC expects a majority of the shipments are likely to land early in 2018,” it says in a statement dated Aug 29. IDC is projecting 9.1% growth next year, driven by sales of the iPhone 8 and the new 7S/7S+ models.

Micro-Mechanics lifted by 2Q results

Shares of Micro-Mechanics Holdings also shot to an all-time high after the company released a positive set of results for FY2017 ended June 30. The stock had been climbing sharply in the past two weeks and closed at $1.495 on Aug 30. That gives it a price-to-earnings multiple of 14.1 times.

The high-precision tools manufacturer has benefited from the strong upturn in the global semiconductor rally in the last six months to June. The company recorded a 19.5% growth y-o-y in revenue to $57.2 million, while earnings leapt 24.2% y-o-y to $14.8 million. Its gross profit margin widened to 57.4% during the year.

As at June 30, the company had cash and cash equivalents of $23.3 million and no borrowings. It proposed to pay a final dividend of four cents a share and a special dividend of one cent apiece on Nov 17. This brings total dividends for FY2017 to eight cents a share compared with six cents for FY2016. The stock has an indicated dividend yield of 4.7%.

Micro-Mechanies could continue with its positive performance ahead. The company says it believes the “robust” 1H2017 may indicate a prolonged period of stronger industry growth, as electronic chips become more ubiquitous. However, it expects a challenging operating environment, owing to rising costs and a shortage of skilled workers.

What to look out for On Aug 31, Germany is expected to release its unemployment data. The US will do so on Sept 1, in addition to releasing its nonfarm payrolls statistics. The Reserve Bank of Australia is expected to announce its interest rate decision on Sept 5. On the same day, the European Union is expected to release its GDP figure for 2Q2017. This will be followed by an interest rate decision to be announced by the European Central Bank on Sept 7.

Crude oil price response to Hurricane Harvey muted; gold breaks psychological barrier of US$1,300; Singapore dollar at new high

Crude oil price response to Hurricane Harvey muted; gold breaks psychological barrier of US$1,300; Singapore dollar at new high

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