Below $30! Crude, Stocks Crash on Iranian Supply and Weak Economics

Posted by Kelly Burke on Jan 15, 2016 3:35:54 PM

Black Friday overliad on 100 dollar bills

Yesterday we saw a somewhat unexpected rebound on oil prices and the stock market - but it all came crashing down today. Crude has officially closed out under $30 per barrel - settling at $29.42, the lowest it's been in 12 years. RBOB closed off almost 5 to settle at $1.0212 - dangerously close to the $1 threshold, and ULSD continued its slide down another .0465 to $0.9343.

The US stock market followed suit with commodities - by mid day the Dow & S&P were both down 500 points, with the Nasdaq off 3% as well. 

What's going on?

China's markets plunged another 3+% percent overnight, stoking fears of a continuing global oil glut. Also playing on those fears was today's data from the Federal Reserve indicating US Industrial Production (manufacturing, mining, and utilities) dropped again in December, which is the 3rd month in a row. Both of these indicators are extremely worrisome in terms of demand. 

More importantly however, it's about Iran.

Reports are that "implementation day" - when Iran shows compliance with agreement terms and has their sanctions officially lifted, could be as soon as tommorow. Once sanctions are lifted, Iran is expected to start exporting their Crude storage as soon as possible, which pushed traders to sell, sell, sell today - to the tune of a 5% drop in pricing. It also keeps the outlook on Crude bearish, as the global market can ill afford millions more barrels entering supply, especially in the face of weakening demand from the US & China - the worlds two largest energy consumers. 

"Happy" Friday everyone - here's hoping for better news next week!

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Topics: CRUDE, RBOB, stock market, oil glut, china, $30 barrel, $1

Monday Sinks on Demand, Tuesday Surges on Supply

Posted by Kelly Burke on Nov 3, 2015 3:22:33 PM

Man grasping his head while looking at computer screens

Yesterday we saw the beginning of a reversal of last week's rally on more bad economic news from China that came out over the weekend. Specifically, manufacturing dropped again, remaining under the level that is seen as official contraction. Once again, this impacts the oil markets because we're counting on their demand remaining high, or even increasing. That doesn't happen when your manufacturing slows down. Monday settled down marginally with the exception of gasoline. (Crude at 46.14, ULSD down -.0098 to 1.5069 and Gas up 37 points to 1.3753).

Today however, was an entirely different story. At the close, ULSD settled at 1.5660 (+.0591), Gas was up (+.0702) to 1.4455, and Crude was up almost 4% to 47.90, with Brent settling up 3.5% to $50.51.

 What Happened?!

Bloomberg & The Wall Street Journal are reporting that in yet more infighting between Libyans and militia factions, Libyan Oil Ministers announced the indefinite closure of a major port by force majeure after the port came under control of "an armed militia". No word yet on who that militia was. The closure will drop Libyan production/export by approximately 70,000bpd. As discussed before, Libya was a major exporter historically, with a capacity of about a million and a half barrels per day but since the country essentially went into a tailspin, that's been dropping. This latest closure brings them down to under half a million barrels a day - less than a third of their capacity.

In Brazil, oil workers began striking Sunday, and reportedly have already dropped State run Petrobras' output by approximately 25%.

So today obviously jumped on supply disruptions - but globally, we are still looking at a supply glut, especially when we look at Chinese economic data and Iran's announcement that they are working towards another half a million barrels a day coming online.

Barring extreme scenarios, one would assume prices would back off some, or stabilize on supply, rather than continue to surge on it. A big mover tommorow could be the EIA Inventory report, and later this week we're looking at more Fed talks. Also, the October Jobs report out on Friday will undoubtedly move Wall Street, but we will have to wait and see how that may or may not impact the NYMEX. 

Stay Tuned!

 

 

 

 

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Topics: Libya, WTI Crude, china, brazil

Crude jumps 4.9% on Rising Tensions, Dropping Rig Counts, and Russia

Posted by Kelly Burke on Oct 6, 2015 3:32:20 PM

Oil barrels laid over an upwards growing line chart

Yesterday we saw Crude jump almost 2% on a weaker dollar and speculations about Russia and OPEC’s upcoming meeting. Today more fuel was added to the fire (no pun intended) and we saw Crude continue to jump, settling out up an additional 4.9% to $48.53/bbl. Going along for the ride, ULSD closed up (+.0632) to 1.6115 and RBOB jumped (+.0509) to 1.4362.

What’s going on?

Primarily Russia and their proposed meeting with the Saudi’s on energy projects and outlooks, as discussed yesterday. (for a quick refresher, read this: Russia, OPEC and a Weaker Dollar - Oh My!).

Interestingly, before the meeting news broke on Monday, the Saudi’s had abruptly announced they would be slashing the price of their oil exports to retain market share – not a good sign for the global economy (demand), or the global supply situation. But the signal that OPEC may be willing to talk, specifically that the Saudi’s are, has more than eliminated any pull back the price cut could have been expected to have.

 Additionally, the Baker Hughes rig count report indicated further drops (down an additional 29), causing Goldman Sachs to project that US production will drop by 225,000 barrels per day in 2016. Reuters is also reporting that Libya’s production has fallen below 25% of the levels it sustained prior to the ouster of Ghaddafi.

Its possible traders are seeing at least a slow-down in the growth of the oil glut on the heels of these news items, reading it as a bullish signal for prices, and acting accordingly.  

There is rumor of a Chinese stimulus attempt as well, aimed at ramping up economic growth in that country, and therefore oil demand. As we’ve discussed before, news out of China is almost always a big driver of market moves, as they’re still the “hail Mary pass” on global economic recovery everyone is holding out for. Positive news from China = Positive numbers on the screen.

Keep in mind - the tense standoff between the US and Russia in Syria may become an increasing factor over time. Yesterday the Russians violated Turkish airspace, and we’ll have to see if there’s more sabre rattling from the Russians, or equally likely, hawkish overreaction by the US or NATO.

Stay Tuned!

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Topics: CRUDE, OPEC, Stimulus, russia, china

Standing Headline: Fed Talks,Chinese Economic Data Pummel Stocks,Crude

Posted by Kelly Burke on Sep 28, 2015 3:46:53 PM

Man grasping his head looking at computer screens

WTI dropped 2.8% today to close out at $44.43 a barrel, while Brent closed out down 2.5% . On the refined products side of the NYMEX, ULSD and Gas both took a pummeling as well, with both down over 4 on the day. To be exact, ULSD closed out down (-.0453) to 1.4772 and RBOB closed down (-.0471) to 1.3488.

So whats going on?

For one, the news from China today was that industrial companies there have seen profits plummet at a faster level than they have in four years, resparking speculation that China's economy is really struggling a lot more than everyone has been assuming. As previously discussed, Chinese economic data is such a huge indicator because they are a top commodities consumer, and strong economic data from China is basically what traders and analysts are "hanging their hat on" as a potential for growing demand to stave off the price crushing effects of the oil glut.

The IMF Managing Director also announced today that although the economy was still recovering from the recession, the pace had decelerated, and the 3.3-3.8 GDP goals for 2015 & 2016 were now "unrealistic". This in combo with the bleak Chinese data pushed crude down quickly both overseas and domestically. 

In related news, Shell announced today that they will be pulling out of Arctic drilling exploration in Alaska. This is primarily a result of the sustained drop in oil prices, and follows a growing trend industry-wide. Over half of American rigs have been decomissioned, and investment into new oil sands projects and new gulf drilling projects has dropped substantially.

Simply put, theres just too much oil out there now to invest huge sums of money into procuring even more of it.  

Wall Street took a beating today as well on Chinese data, the IMF remarks, and continued rumor milling over the timing of the Fed Rate hike. The president of the NY Fed suggested it could happen as soon as October, where others have speculated December was the likely target date. So once again, Fed talks and the resultant speculation, combined with some more "surprise" bleak economic data hammered stocks today - which is starting to seem like a standing headline at this point. 

Stay Tuned!

 

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Topics: CRUDE, FED rates, economic data, stock market, IMF, brent, wti, china, fed

Gains After Another Black Monday - Dead Cat Bounce or Rebound?

Posted by Kelly Burke on Aug 25, 2015 3:38:47 PM

Line charts depicting the stock market scattered on a table

Today we saw some reversals in the abject panic selloffs we saw Friday and especially Monday. (Click here to recap Friday)

First, lets recap Monday's insanity:

Monday saw WTI tumble another 5.5% to close out below $40 to $38.24 for October delivery. Brent fell in tandem, about 6% to settle out at $42.69 for October delivery. 

We saw stocks extend losses as well - shortly after Monday's open, the Dow was down an unprecedented 1,000 points, it ended up bouncing around and settling down 588 points on the day. Monday saw the S&P in full correction mode for the first time since 2011, as was the Nasdaq,  and it was the Dow's worst performing day since 2011 as well. 

What happened? Essentially everyone is in full on panic mode in terms of selling off. Panic over Chinese economic data gave us Friday's plummet, and then The Shanghai index was down 8.5% Monday which kept the selling right on going. 

This morning we're seeing some rebounding on stocks as well as commodities, after the Chinese made a surprise interest rate cut in an attempt to stem the bleeding. It's uncertain if this is really inspiring confidence in investors, or we're just seeing the infamous "dead cat bounce" that often accompanies several days of heavy losses. Time will tell. 

As of 3pm, the markets are all positive on the day - a trend unlikely to reverse before the close... but, perhaps not likely to continue through the week either. 

On the commodities side, Crude rebounded this morning somewhat, finally settling out in positive territory from yesterday at $39.31.

ULSD and RBOB have gone back and forth from positive to negative throughout the trading day, but at the close, diesel was essentially flat (+.0023) at $1.3952, and RBOB was down -.0324 to $1.4386.

Don't forget that the EIA Inventories come out in the morning as well, which could impact how the markets shake out tommorow. 

Stay Tuned!

 

 

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Topics: CRUDE, stock market, brent, wti, china

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