BREXIT Surprise Sends Financial, Oil Markets Reeling

Posted by Kelly Burke on Jun 24, 2016 4:53:56 PM

dreamstime_xs_67424304.jpg

Yesterday traders across the globe were all but certain that Britain would never vote to leave the EU. As a result we saw confidence in the markets, including oil.

100% of those traders were apparently incorrect. 

Today we saw Japan shut down trading, the pound lose over 15%, oil markets tumble and Wall Street get hammered. The Dow closed down 600 points today, the worst day since 2011 - all of this in the wake of Britain indeed voting to leave the European Union. 

On the commodities side, while gold and the dollar went up, WTI slipped 4.9% (over $2/bbl)  to close out at $47.64. Gasoline tumbled $.0785 to $1.5250, and ULSD dropped $.0653 to $1.4553.

So what now?

Many analysts think that oil prices will rebalance and stabilize given the UK is essentially irrelevant to global oil demand, and therefore pricing.

Others caution however that this move by Britain may signal rough waters ahead for the European Union and its economic growth - and therefore oil demand, which could increase supply versus demand. 

With the British pound's slip comes a necessarily strengthening dollar, which would argue aginst a precipitous slide in oil prices, given the backdrop that production and demand issues aren't, at least in the near term, greatly impacted by the Brexit vote. (Backdrop being U.S. Rig counts are still by and large declining with the exception of a few pop ups, the new Saudi Oil minister is still seen by many as a step forward in market stability, etc etc...). However, its also likely the dollar is extra overpriced today simply because of its strength relative to the pound, which ought to also rebalance - at least in theory.

After one hell of a suprise Friday - Next week should be an interesting one on the markets, to say the least. 

Enjoy the weekend, everyone. If you need us, give us a shout. 

 

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Topics: European Economy, CRUDE, Dollar Strengthens, Brexit

Crude ends the Week in the Red on Strong Dollar, Supply

Posted by Kelly Burke on Oct 23, 2015 2:52:47 PM

Line charts depicting the stock market scattered on a table

Crude prices are on track to be down around 5% on the week. There were some initial jumps this morning on hope that the newly announced Chinese Stimulus Package could ramp up demand. Prices reversed sharply and quickly, however, as the dollar continues to crush other currencies, which almost universally sends commodities in general on a slide. 

On Wednesday prices touched near 3 week lows on the EIA reporting yet another gain in US Inventories, despite our being into the typical "slow down" phase, when refineries go offline for maintainance, and despite continuing drops in rig counts (and therefore a theoretical drop in production).

Also, on Wednesday morning we still had a sliver of hope that the OPEC meeting would come out with supply cuts - nope, wrong again. Now we will have to wait until the December 4th policy meeting of OPEC to know for sure if there will be supply cuts, but it seems extremely unlikely to most-  as the Saudi's have demonstrated, their main goal is market share retention, and they seem to accept that the crumbling economies of other oil producing countries is essentially a cost of doing business (much to the chagrin of those countries).

However, Bloomberg and others are reporting that the low pricing is starting to hurt for Saudi Arabia as well, as reportedly they have deferred payments to government contractors as the country begins to slide into a deficit. (Excellent read on MarketWatch on the subject here: "Will fiscal pain of low prices force Saudi Arabia's hand ). 

Thursday saw a quick reversal, but again, that's history now on the back of the dollar. The European Central Bank stated they are looking at "options" for economic stimulus for the Eurozone, which thus far has only really pushed the euro lower versus the dollar, and weighed on Crude and other commodities. 

At the close today, WTI settled the week at 44.60, and Brent at 48.02. (ULSD closed down -.0106 on the day to 1.4544 and RBOB was down slightly by -.0031 to 1.3036)

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Topics: European Economy, CRUDE, OPEC, Dollar Strengthens, brent, wti

Retail & Market Prices Drop on Crude Supply & Pricing

Posted by Kelly Burke on Oct 8, 2014 1:44:23 PM

Fuel pump filling up a commuter car

EIA weekly petroleum report showed inventory gains across the board.

Analysts had expected much smaller builds in CRUDE than the actuals, and had anticipated drops in both gasoline and distillate inventories - neither of which came to fruition. (Who are these "analysts" anyways - not even CLOSE, guys!)

  • CRUDE: inventories jumped 5 million barrels. (Expectation was a build of 1.9 million barrels)
  • Gasoline: inventories jumped 1.2 million barrels, while the EIA showed a drop in consumption of 1.3%. (Analysts had anticipated a 900K barrel drop)
  • Distillates: inventories were up 400K barrels. Both production and consumption levels dropped for distillates. (Analysts had antipated a 1.2 million barrel drop) 

Retail gasoline prices in the US have been trending downward big time, spurred on by the drop in CRUDE prices, as well as weakening demand. The reported average for last week was 3.41/gal in September which is almost 30 cents below the average price 4 months ago. AAA is reporting that the current average gasoline price is $3.267 - a little over 8 cents a gallon cheaper than this time last year. 

Lower global demand, high supply, and a bleak global economic outlook (we're looking at you Europe) dropped Brent Crude to lows we havent seen in years - September was the first time Brent traded under $100/bbl in 2 years, and last week saw Brent hit $92, close to a 27 month low.

WTI is trading down as well, having broken through several resistance levels, and hit $86.20 after the EIA report hit this morning. (At the moment its -1.53 to 87.32 on the electronics)   

The NYMEX is trending down today again, currently ULSD is down over 3 cents (-.0326 to 2.5747) and RBOB is down over 4. (-.0466 to 2.3217)

Stay Tuned!

 

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Topics: European Economy, Brent Crude, Gasoline demand drop, CRUDE, WTI Crude, EIA Inventories, retail gasoline

IMF News, Germany, and the Dollar Pushing Markets Down

Posted by Kelly Burke on Oct 7, 2014 12:24:05 PM

Magnifying class showing the Internation Monetary Fund logo

The International Monetary Fund (IMF) announced this morning it was downgrading its outlook for Global growth in the wake of disappointing growth in the Euro Zone and Japan. This is the third time this year the IMF has revised its outlook down (this time to 3.3% from 3.8%) and out of the last twelve forecasts in the past 3 years, they've revised 9 of the estimates down. According to Fox News, the IMF consistently has based projections off of an assumption that wealthier nations would be able to reverse their high debt, high unemployment environments a lot faster than they have been.

The IMF's gloomy outlook on the Euro Zone and bleak projections for growth potential in emerging markets has been another force behind the rally of the US dollar, as the US economy has started to stabilize versus other major nations, especially France and Germany. Germany hit a record 5 year low on industrial production, not good considering they are one of the critical economic players in the zone. 

The news from the IMF pushed US stocks down at the open this morning, understandably. A related factor in the downwward push was the IMF warned that increased interest rates by the US Fed could stall progress in the US - and since essentially they are reporting that the US and Britain are holding everything afloat outlook wise - thats really not good economic news for anyone. 

Commodities are pushing down today, with Germany's abysmal output pushing the dollar higher. The stronger the dollar, the higher relative cost to non-dollar currency becomes, which would push demand even lower in Europe, especially in tandem with a slower economy overall. 

This week will see reports out from the US Energy Information Agency (EIA), the Organization of Petroleum Exporting Countries (OPEC), and the International Energy Agency (IEA) -- all of whom are expected to project lower demand as well. 

As of noon, CRUDE is trending down -.97, ULSD is down -.025 and RBOB is down -.0404 with all looking like the trend will continue throughout the afternoon. 

Stay tuned!

 

 

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Topics: Commodities, European Economy, CRUDE falls, Dollar Strengthens, IMF

Markets React to Syrian Conflict and Implications of US Intervention

Posted by Mark Pszeniczny on Aug 28, 2013 3:42:00 PM

As news continually breaks on developments on the Syrian conflict and the potential implications of US or other world power intervention in the region, stocks are dropping and commodities are going through the roof.

US Secretary of State John Kerry announced this week that there was “undeniable” evidence that the recent chemical weapons attacks in Syria were perpetrated by the Assad regime. The announcement in tandem with the presence of UN Weapons inspectors being fired upon in the country prompted speculation that the US may intervene with military action. Additionally, the
recent attacks cross the “red line” declaration issued by the Obama administration several months ago regarding chemical weapons.

The threat of US intervention has prompted Global Markets to react heavily to the news. In the US, the Dow fell Tuesday by over 170 to hit a two month low of 14,776.13 and the Nasdaq fell 78.13 points to 3579.44. Stocks took a hit while commodities shot up, notably gold in both the US & Canada. Brent Crude hit a six month high on Tuesday in the wake of the rumors of
military action, and US Crude rose over 3 dollars as well. Oil Prices have risen 15% over the past 3 months on concern over violent civil war in Egypt, and now conflict in Syria is pushing them even higher.

The issue with Syria is complex – Syria itself is not a major exporter. The issue is essentially concern that US intervention in Syria will spark regional unrest as well as create increased tensions with other major world powers, specifically Russia and China. Consensus seems to be that the major issue with intervention in the conflict could interrupt export and production schedules, particularly those in Iraq and Libya, according to cbc.ca.

It’s estimated that about 1% of global oil supply runs through the bay of Iskenderun in Turkey, only a few miles off the Syrian border, and tensions in Syria could threaten this export route, according to Olivier Jakob of Petromatrix in Reuters on Tuesday. Disruption of this supply
route would have a deep impact on European and Asian markets, particularly if tension spreads throughout the Middle East, which produces over 1/3 of Global Oil supply.

 

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Topics: European Economy, Eygpt, CRUDE, rising gas prices, Syria

Futures Turn on Stimulus Talk

Posted by Mark Pszeniczny on May 15, 2013 5:29:00 PM

Much of what we view every day in this business is based primarily on expectations and ultimately, reality.  Today was precisely one of those days.  While most expected slightly bearish inventory numbers, the news at 10:30 that showed Gasoline's up 2.6mbl and Distillates up 2.3mbl well beat expectations of builds of 700k and 800k respectively.  Pits reacted by selling off over four cents in each HO and RBOB.  With Crude showing a draw of 600k barrels while many expected a build of the same amount, you had to think how long the fall would last.  At the same time, the European Zone released figures that showed its GDP fell for the sixth straight quarter.  Soon talk of more FED stimulus took over the trade and the buy back gained momentum.  From what started out as a solid down day, turned on the expectation of what we think might happen, thus pushing the NYMEX higher by the closing bell.  At the close, Crude gain .09 to $94.30, HEAT added .0071 to $2.8801 and RBOB led the charge jumping .0294 to $2.8670, almost .10 higher than the intraday low.... Looks like some expect a busy driving season.

 

RBOB Close
      Close            Change
JUN    2.8670       +.0294
JUL    2.8480       +.0276
AUG    2.8192       +.0260
SEP    2.7853       +.0247
OCT    2.6407       +.0190
NOV    2.6130       +.0166
HEAT Close
       Close            Change
JUN    2.8801       +.0071
JUL    2.8742       +.0080
AUG    2.8797       +.0095
SEP    2.8892       +.0107
OCT    2.8977       +.0111
NOV    2.9031       +.0107
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Topics: European Economy, Futures, GDP, Distillates Build, Stimulus

NYMEX Makes an About-Face on Jobs Report

Posted by Mark Pszeniczny on May 3, 2013 5:06:00 PM

After starting the early morning in the red, Markets made an about face mid morning as new economic news hit the wires. The Jobs report showed an additional 165,000 jobs were added last month, above the 148k expected. That pushed unemployment down to roughly 7.5%, additionally the magic pencil revised March and February numbers up by a combined 60k jobs. While these are encouraging numbers for the US workforce, most agree that the World market may not be as optimistic. A well supplied market and growing concern over an already fragile European Zone, which today cut forward growth rates, has limited the upside to the NYMEX over the last several sessions. Additionally, China is expected to report sluggish manufacturing rates next week. As the day went on, distillate markets cooled off while gasoline still stayed strong. Look for next week to be much of the same as positions look to be solidified as we move towards the summer driving hype. At the close, Crude added $1.62 to $95.61, HEAT gained .0289 $2.8844, and RBOB jumped .0448 to $2.8254

 

DAILY HEAT CHART

Daily heat chart

RBOB Close
CLOSE CHANGE
JUN 2.8254 +.0448
JUL 2.8072 +.0418
AUG 2.7817 +.0399
SEP 2.7515 +.0394
OCT 2.6101 +.0392
NOV 2.5867 +.0376
HEAT Close
CLOSE CHANGE
JUN 2.8844 +.0289
JUL 2.8824 +.0291
AUG 2.8884 +.0312
SEP 2.8964 +.0321
OCT 2.9032 +.0324
NOV 2.9072 +.0321
 
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Topics: European Economy, Jobless numbers, Euro Debt Zone, Chinese Industrial Output

Spanish Banking Bailout causes Stir, Only to Falter

Posted by Mark Pszeniczny on Jun 11, 2012 3:24:00 PM

For many of us who log in to check the market on Sunday evenings at PM, it is often times like Christmas morning to see what the surprise will be. Last night we got a lump of coal to see Commodity futures skyrocketing on news of a Spanish banks receiving a $120 billion dollar bailout. Heating Oil was as high as +.07 at one point. The infusion of cash looks to signal that the Euro will be around for a while longer. As the sun rose, the speculative gains were peeled away and the wheels fell off the cart with about an hour left in the session. Crude finished less $1.40 to close at $82.70, RBOB slipped .0286 to $2.6566 and HEAT fell .0364 to $3.6357, a whopping .11 cents lower than Sunday evening. It appeared that the bullish appointments on the calendar just could not keep the rally going. Next week, Greece has elections, Iran is set to meet with a group of five Nations on its nuclear program with Israel going increasingly impatient and the scheduled FOMC meeting. Many have commented on the limit to the downside in the pits after retracing some 60 cents in the last 50 days. With Europe still not out of the woods, the trend is your friend.

Daily Heating Oil Chart

heat map

RBOB CLOSE
CLOSE CHANGE
 
JUL 26566 -.0286
AUG 25877 -.0338
SEPT 25322 -.0378
OCT 23775 -.0387
NOV 23511 -.0388
DEC 23428 -.0365
HEAT CLOSE
CLOSE CHANGE
JUL 26357 -.0364
AUG 26394 -.0357
SEPT 26468 -.0350
OCT 26558 -.0352
NOV 26676 -.0352
DEC 26789 -.0354
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Topics: Iran, European Economy, Spain Banking Bailout, Euro Debt Zone

European Zone Crisis pushes Futures Lower

Posted by Mark Pszeniczny on May 17, 2012 3:44:00 PM

For the last several days NYMEX values have been on the losing end of good Ol' fashion Donny Brook coming at the hands of the ongoing European debt crisis. With new Leadership installed in several countries, investors are not taking any chances and removing cash as quickly as possible. The latest round today had the European Central Bank preparing for Greece's exit from the Euro sending the currency to a four month low versus the US dollar. Commodities again were the collateral damage as money continues to exit the pits. Japans signs of economic recovery from their recent natural disasters, reports showed a 1% increase in their economy, along with an anemic Jobless claim report ( statically flat) could not stop the bleeding in the pits today. When prompt Heat was at 3.30,we noted the major support level to be at 2.75 with a few stop along the way and a key being 2.95. As those levels have been broken, it will be interesting to see where we stop. Interesting to note the seaway pipeline that runs Crude north to Cushing, OK has just finished a flow reversal that will allow product to move south from Cushing to the Gulf region for refining. Product is expected to flow this weekend, alleviating the glut of WTI in the US, should also play a role in reducing the Brent - WTI spread. At the close Crude lost .25 to $92.56, HEAT fell .0486 to $2.8490 and RBOB lost .0427 to settle at $2.8782.

 

Daily Heating Oil Chart

daily heat map

RBOB CLOSE
CLOSE CHANGE
 
JUN 28782 -.0427
JUL 28174 -.0477
AUG 27737 -.0494
SEPT 27354 -.0497
OCT 25962 -.0482
NOV 25643 -.0477
HEAT CLOSE
CLOSE CHANGE
JUN 28490 -.0486
JUL 28556 -.0483
AUG 28641 -.0478
SEPT 28723 -.0474
OCT 28804 -.0467
NOV 28889 -.0462
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Topics: European Economy, Greece, Brent Crude, Brent vs WTI, Euro Debt Zone

Futures Continue to Rise as All Eyes on Iran

Posted by Mark Pszeniczny on Feb 22, 2012 3:59:00 PM

It seems like we have been repeating the same mantra for a month, " we appear to be at the high end of the range".... Unfortunately we haven't moved any lower. Since the begriming of the month we have seen roughly 20 cents gets tacked on to HO ( as shown below) . Presently we are at 18 month highs for the Heating Oil pit. Early in todays session it appeared we were going to have a healthy correction as both pits were off roughly 2 cents on news of lagging manufacturing rates. That sell off gave way to a buying spree as more and more people put Greece on the back stove and gave credence to Iranian threats. Iranian ministers again today announced it would not idly sit by if provoked by another country. This comes on the heels of yesterdays announcement that it would take "preemptive measures" if provoked by sanctions. The nation has already cut supplies to the European zone that continues to be mired in a deep freeze. There is no doubt that we have a problem in Iran, the key will be how the White House chooses to deal with it. Domestically, as gas prices continue to rise, the self fulfilling prophecy has taken hold over news outlets predicting $5 gas by Memorial Day. All in all, there is very little in the way of bearish data or news to push the trade down and as historically happens, demand destruction will be a deciding factor for lower prices. At the close, Crude rose 3 cents to $106.28, RBOB tacked on .0175 to $3.0877 and HEAT gained another .0331 to $3.2724.
 
heat map
RBOB CLOSE
CLOSE CHANGE
 
MAR 30877 +.0175
APR 32630 +.0145
MAY 32536 +.0151
JUN 32249 +.0160
JUL 31842 +.0158
AUG 31372 +.0150
HEAT CLOSE
CLOSE CHANGE
MAR 32724 +.0331
APR 32650 +.0302
MAY 32509 +.0271
JUN 32417 +.0250
JUL 32429 +.0232
AUG 32445 +.0211
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Topics: Iran, European Economy, $5 Gas

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