G20 Summit Answers Looming Market Questions

Posted by Kelly Burke on Jul 1, 2019 3:23:56 PM

G20

Prices surged this morning after a slow down on Friday, on news from the G20 Summit that Russia and Saudi Arabia have agreed to extend the OPEC+ production cuts by another 6-9 months. The agreement still needs to be ratified at the upcoming OPEC meeting, but that is essentially a formality at this point, given Russia & the Saudi's are in agreement. 

The demand side of the equation also got a boost from the announcement by President Trump that no new sanctions would be put in place on China, at least for now. Speculation on potential tariffs has been a cloud over trading for several weeks. 

Markets were up huge this morning, with gas briefly up over 5 cents and diesel not far behind, and Brent Crude up over 2%. It calmed over the trading day however, and at the close we saw ULSD +.0144 to $1.9538, Gas up .0339 to $1.9305 and Crude settled at $59.09

Looking backward, despite closing down on Friday, the month of June was up 9% on concern about Iranian-US tensions, Chinese tariffs, and the OPEC/G20 production discussions. Now that some of these have evidently been resolved, at least temporarily, it will be interesting to see what July holds for market moves. 

Stay Tuned! 

 

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Topics: Saudi Oil Minister, russia, china, G20 Summit, tariff

EIA Data, Refinery Closures & International Tensions Spike NYMEX

Posted by Kelly Burke on Jun 26, 2019 3:07:45 PM

shutterstock_146565659

The NYMEX is up big this afternoon in the wake of surprise draws in inventories, ongoing international issues, and the potential closure of the largest gasoline refinery on the East Coast. 

Inventories: Crude was projected to drop ~2.5mmb but EIA data showed a surprise drop of a whopping 12.79mmb for the week ending June 21.

Gasoline & Distillates were both expected to show builds, but gasoline drew down 1 mmb, and distillates dropped 2.44mmb (projections were for builds of 0.29mmb & 0.52mmb, respectively).

Crude jumped over 3% on the news, and refined products shot up as well. Gas has been up over 8 cents most of the day, with diesel up .04-.05. 

At the close, Crude settled at $59.38, ULSD jumped .0479 to $1.9713, and Gasoline was up .0932 to $1.9704

International Tensions The ongoing tension between the US & Iran continues to make markets nervous as we wait to see what the next steps may be after the abrupt calling off of air strikes last week in response to Iran shooting down an American drone. 

Continuing concern about the ongoing saga regarding US-China relations and the potential ramifications of proposed tarriffs on Chinese manufactured goods is also serving to keep markets on edge. 

The G20 Summit is slated for this week, and all eyes are on reported meetings to occur between Russian President Vladimir Putin and the Saudi Crown Prince. The previously scheduled OPEC meeting for the end of this month has been postponed, purportedly in order to allow for Russia & Saudi Arabia to discuss the so called OPEC+ deal on production caps, and what the ongoing supply curbs under that deal may look like at the summit. 

Refinery Closures  In addition to inventory draw downs, the Philadelphia Refinery that suffered an explosion last week when a vat of butane ignited is reportedly seeking to shut down permanently. The site is the largest gasoline refinery on the East Coast, and the long term supply impacts of it's shuttering could be substantial.

Stay Tuned!

 

  

 

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Topics: Iran, East Coast Refineries, Refinery Closures, EIA Inventories, china

WTI Hits Lows on Inventory & Projection Data

Posted by Kelly Burke on Jun 12, 2019 3:45:37 PM

WTI Brent Crude Decline

Prices continued to slide Wednesday as the EIA reported builds in Crude supplies of 2.21mmb for the week ending June 7th. (Yesterday, the API report indicated even more drastic build of 4.9mmb). This afternoon, WTI closed out at $51.14/bbl, the lowest close since January. WTI has dropped close to 20% since April peaks. 

On the NYMEX today, both gasoline & distillates tumbled alongside Crude, shedding -.0702 and -.0422, respectively. (The session closed out at $1.6861 for RBOB, $1.7799 on ULSD.) 

In addition to pricing being low, demand forecasts have been revised downward for 2019 & 2020 by the EIA, by around 100K bbl per day, globally.  

However, despite both the drop in prices and the slowing demand, forecasts indicate that not only will production continue in the US, but will ramp up by approximately 1.4mmb/day in 2019, according to the EIA. This is supported by statements made by the Deputy Energy Secretary of the United States, Dan Brouillette this week, who said production would continue to increase domestically despite pricing and demand concerns and he expects that demand concerns will resolve "as the economy begins to rev up". He also dismissed concerns that the ongoing tariff dispute with China would adversely impact US production, which remains to be seen. 

Analysts seem to be in agreement that OPEC is unlikely to seek any more curbs in output for their member nations, so essentially, with no major impact events on the horizon, we are just waiting to see if this is the bottom, a new normal, or a temporary blip. 

Stay tuned!

 

 

 

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Topics: EIA, WTI Crude, EIA Inventories, china

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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