The GERM Report

-Eurozone PMI just barely on the positive side of growth.

-Libyan government in Tripoli declares cease-fire.

Crude oil prices were moving into negative territory for the third-straight session on signs that hopes for a V-shaped economic recovery are fading. The data firm IHS Markit found that economic growth in the Eurozone is slowing down just as warring factions in Libya look to set down their arms. While a Libyan cease-fire would be tenuous at best, reports early this week suggested some port activity could resume and put more barrels of oil on the market. And don’t discount fireworks on the US political scene amid electioneering, voter interference and fraud allegations in the president’s inner circle.

The price for Brent crude oil is on pace for a weekly loss of more than 1%, even after official US data reported another drain on total commercial crude oil inventories. With weak economic readings from Europe, the global benchmark was down some 1.3% as of 8 a.m. ET to trade at $44.28 per barrel.

“Eurozone growth loses momentum in August,” reads the title of Friday’s report on manufacturing in the regional economy from IHS Markit.

IHS found the composite Purchasing Manufacturer’s Index for the countries that use the euro currency came in at 51.6 so far in August, just on the positive side of the 50 mark separating growth from contraction. The July reading came in at 54.9. Following an unexpected uptick in unemployment claims in the United States, the data firm found that unemployment was also on the rise in the European economy, though job cuts softened from the record level in April. By country, German remained on solid ground, though growth in France suffered a setback.

“The eurozone stands at a crossroads, with growth either set to pick back up in coming months or continue to falter following the initial post-lockdown rebound,” Andrew Harker, the economics director at IHS Markit, stated. “The path taken will likely depend in large part on how successfully COVID-19 can be suppressed and whether companies and their customers alike can gain the confidence necessary to support growth.”

That weakness almost certainly helped drag crude oil prices lower in early Friday trading. OPEC economists in their monthly report for August estimated the US economy would contract some 5.3% this year, while the eurozone shrinks by around 8% on the year. That weakness prompted OPEC economists to lower their global demand forecast slightly to 9.1 million barrels per day. Reporting by Reuters and others on total OPEC restraint found that overproduction by some of its members means output is closer to 9 million bpd than the 7.7 million bpd from July, leaving the market looking a bit oversupplied.

That could become even more pronounced if recent developments in Libya continue on trend. We commented earlier this week on positive developments in Libya after the Argus media group reported that militias operating in the east of the country may allow stored oil to leave ports. Internally, Libya is divided between the UN-backed administration in Tripoli in the west and a rival authority in the east of the country. On Friday, the government in Tripoli “issued instructions to all military forces to immediately cease fire and all combat operations in all Libyan territories.” The Libyan National Oil Corp., which is based in the west of the country, had no immediate statement and it appears as if force majeure declarations hold for now.

In the US political scene, the turmoil continues. Former Vice President Joe Biden accepted his party’s nomination for president on Thursday, drawing a stark contrast to the ruling style of President Donald Trump.

“If you entrust me with the presidency, I will draw on the best of us, not the worst,” he said. “I will be an ally of the light, not the darkness.”

Trump uses confusion and chaos to keep his opponents on their heels, while claiming himself the savior after the stroke of the pen overcomes the partisan gridlock he himself helped create. The president has stoked concerns that voting by mail during the pandemic is open to fraud, though there are few indications those concerns are valid. The top head of the US Postal Service is a top campaign donor to the president, who is claiming to address budgetary concerns by systematically tearing down parts of the mail service to interrupt the voting process. The postmaster general testifies Friday before US lawmakers. The president, meanwhile, may be restless after his former chief strategist, Steven Bannon, was arrested on fraud charges related to Trump’s vision of fortress of sorts along the US-Mexican border. An angry President Trump has proven his ability to influence the market with a single tweet.