Russia, OPEC and a Weaker Dollar - Oh my!

Posted by Kelly Burke on Oct 5, 2015 3:38:37 PM

Line charts depicting the stock market scattered on a table

The markets are up across the board today, from stocks to Crude oil. 

ULSD was up +.0284 to 1.5483, and RBOB shot up +.0439 to 1.3853, front month, at the close. WTI Crude was up almost 2% to close at 46.26/bbl. 

What happened?

Reportedly, Russia is open to talks with OPEC and other oil producing nations to discuss pricing and global supply. Although no actual meeting has been proposed, traders were still optimistic, and both WTI and Crude jumped up on the news. (Prices were also bolstered by a perceived weakening dollar – more on that in a moment.)

Additionally, apparently Russia and the Saudi’s have a meeting scheduled this month to discuss energy projects, and one can probably assume this will include how they will approach the OPEC meeting, if there ends up being one.

On Wall Street, disappointing job numbers from last week, coupled with a statement from the Boston Fed Chair that growth would have to be hitting 2% target rates to justify an interest rate increase resulted in a semi consensus that the odds the interest rate goes up in October is around 10%. As a result, stocks were up….but for how long?

While the Fed delay was good for Wall Street today, it’s not really a good sign bigger picture, both for Wall Street and the US in general. We saw one effect of that today, where the jump in commodity pricing can be somewhat pegged on the dollar starting to weaken on soft economic data and the implication that the US economy is not strengthening on its anticipated trajectory, as implied by the Fed delays.

Something of note internationally, that could have broad impacts on the markets, is that tensions between the US and Russia are approaching Cold War levels as Russia continues air strikes in Syria. The strikes, ostensibly part of a multifaceted attack on ISIS in Syria have apparently actually been hitting anti-Assad rebels, who are at least nominally supported by the US. To add another splash of gasoline to the fire, this weekend a Doctors without Borders hospital was bombed in Afghanistan, and it appears a US aircraft may have been involved, which could obviously have devastating international consequences, both geopolitically and otherwise.

Stay tuned!

 

 

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Topics: OPEC, FED rates, Syria, russia, WTI Crude, ISIS

Greece Nears Default, Sends Global Stocks & Commodity Prices Reeling

Posted by Kelly Burke on Jun 29, 2015 2:52:50 PM

Sillouettes of people infront of charts showing Greek Debt

Stock Markets across the Globe dropped sharply on worries over Greece's potential (and frankly, very likely) default. Greece owes the IMF  a 1.8 billion dollar payment tommorow, but their Prime Minister has pushed voting on whether to accept referendums to July 5th, making it pretty clear Greece is unwilling and unable to make their required payments. 

European stocks dropped on fear that Greece will vote to leave the European Union rather than work with creditors and the European Central Bank to structure repayment obligations. If Greece leaves the union it could impact the Euro currency and that uncertainty will probably continue to impact the market on some level until we see how it all plays out. 

Greek banks and markets are closed this week, after a rush on banks and ATMs nationwide sparked fears of the system collapsing under the weight of citizens pulling all their money out simultaneously. This morning the Greek stock market was down over 15% despite not even being open. 

Closer to home, the Governor of Puerto Rico has announced it is "simply not possible" for the province to pay its required obligations. They owe 94 million by July 15, with another 140 million due by August 1 on bond principal. 

This weekend also saw three seperate terrorist attacks in 3 seperate countries, all of which ISIS claimed responsibility for. 

Needless to say, things are not looking good globally, both in terms of safety and economics. 

In terms of commodities, Greece seems to be the focus, while terrorism attacks are being ignored as evidenced by the across the board drops we are seeing. WTI and Brent Crude were both down over 2% in this mornings trading. ULSD and RBOB front month are both trending down today, with ULSD closing out at 1.8366 (-.0262) and RBOB settling at 2.0303 (-.0182) 

Stay Tuned!

 

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Topics: Greece, Euro Debt Zone, ISIS, IMF

Commodities, Stocks and Consumer Confidence Drop

Posted by Kelly Burke on Sep 30, 2014 4:16:50 PM

Line charts depicting the stock market scattered on a table

November traded down huge today on the NYMEX with ULSD closing down -.0577 to 2.6505, and RBOB closing down -.0769 to 2.4373. October trading ended today, with the month closing ULSD at 2.6472 and RBOB at 2.5869. 

Analysts are predicting a supply build ahead of the EIA data due out tommorow in the neighborhood of 1.5 million barrels on CRUDE. Like we mentioned last week, the stable to increasing supply levels domestically have been a huge factor in keeping prices less volatile globally, in spite of the global insanity happening right now, especially surrounding the air strikes against ISIS.

US Supply is growing, and concerns over Libya's production are waning since they've been hitting production targets, so supply disruption in Iraq becomes an increasingly less catastrophic possibility. US import declines too serve to "free up" global supply for others, which let's everyone relax a little on potential disruptions. 

Brent and WTI are both poised to hit their biggest quarterly declines in 2 years.

The dollar strengthened for the quarter, surging up 7% - the biggest gain for a single quarter since 2008. As we've seen historically, a strong dollar can soften commodity prices, and thats probably another factor in the pullback we've seen. The dollar also impacted stocks this week, causing them to stumble hard Monday, despite increases in consumer spending reported. The concern is that the Fed is winding down its tapering and may hike interest rates in the near future if the economy is advancing and the dollar strengthening - this kind of speculation on the Fed almost always has a ripple of sell offs surrounding it, like we saw earlier this year. 

Stocks went lower today on the backs of energy stocks pushed lower on the dropping prices, and dissapointing consumer confidence index numbers. 

 

 

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Topics: Brent Crude, FED rates, Dollar Strengthens, WTI Crude, EIA Inventories, ISIS, stock market

Targeting ISIS - Oil Prices & Air Strikes

Posted by Kelly Burke on Sep 25, 2014 9:27:49 AM

Line charts depicting the stock market scattered on a table

 Supplies & EIA Data

August saw record high export levels - 3.96 million bpd, up 17% year on year, and refinery output was also up 2.3% over last August. We also saw Crude production surge 16% - largely from Eagle Ford and Bakken shale formation drilling, and on the flip, imports dropped to 7.6 million bpd for the month - the lowest import level seen in August for over 18 years. 

However,EIA data for this past week showed large draws - attributed to those same lower imports we saw over the August period. Crude Supplies were down over 3 million barrels, way off of the 750k barrel gain forecasted by analysts. Gasoline showed draws as wel -lin the neighborhood of 440k barrels.  These draws in supply are supporting the current price levels we are seeing. 

 

ISIL/ISIS & Syria

This week kicked off a coordinateed air strike camaign between the US and primarily Arab Allies bombing ISIS/ISIL targets in Syria.  

Reports are that the major source of funding for ISIS is blackmarket oil - they may be generating up to 3 million dollars PER DAY.

US supplies may actually be a critical factor in targeting ISIS. Why? Because high US stockpiles help stabilize global prices, and lower global prices mean lower blackmarket prices, which hurts ISISs ability to self fund.

Saudi Arabia & OPEC in theory could threaten to curb supply to maintain or force high prices -that would be better for their revenue- however, the Saudis have said they will not change any agreed upon supply. Why? 

Because they want ISIS out of the picture too, so even though this years slide in pricing is hurting the bottom line for some oil producing nations - maintining lower prices forces ISIS to keep cutting the price on black market oil to maintain the discount and the lower it goes, the lower their revenue drops. Add to this that 12 modular refineries are targets for the air strike and you effectively dry up their ability to self fund, as well as their ability to fuel their operations. So, for the Saudis et al - a short term budget shortfall makes long term sense because it can take ISIS out of the equation entirely in the future (in theory anyway). 

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Topics: US Energy Boom, OPEC, Syria, ISIS

NYMEX Continues Losing Streak Despite New Middle East Concerns

Posted by Kelly Burke on Jul 9, 2014 2:59:42 PM

Line charts depicting the stock market scattered on a table

By the Numbers:

Monday marked the 7th straight session oil futures dropped, which is the longest we had seen since December of 2009. Tuesday accelerated the drop off, with ULSD closing down -.0409 and RBOB dropping -.0161 to 2.9729. 

This morning it appeared US Crude may erase some of the drop off over Israeli/Hamas fighting that has erupted this week, but the downward trend has continued - albeit less rapidly. ULSD closed off 25 points to 2.8711 and RBOB closed down -.0352 to 2.9377

Whats Going On:

The spikes we saw in June mainly stemmed from concerns about the Iraqi/ISIS conflict and subsequent fears of interrupted supply. So far though, exports from Iraq have remained stable and uninterrupted, which has let prices ease off. Even European Brent Crude has gone back to pre-Iraqi tension levels. 

Also - remember those Libyan ports that were seized by rebels last July and have remained offline since? Well it looks like they will finally be coming back online, which could up Libyan exports by up to 800,000 barrels per day. The caveat here though, is prior discussions on moving Libyan exports back up have fallen through, so theres no guarantee on what production levels they'll actually hit.

What to Watch For:

The potential storm cloud on the horizon is the Israel vs. Hamas situation unfolding. Palestinian officials are reporting over 35 killed and 300+ wounded in Gaza  as a result of Israeli airstrikes. The strikes have reportedly hit over 450 locations in Gaza, while Hamas has launched rockets far deeper into Israel than before - hitting tech centers, Tel Aviv and northern counties. Israel is reporting that since Monday afternoon, over 200 rockets have been fired at the country, in addition to over 50 that were shot down by drones before impact.

Israeli Prime Minister Netanyahu has reached out to the UN & US to condemn the Palestinian action, while some newspapers are reporting that Palestinian President Abbas has reached out to the Egyptian President to moderate discussions for a cease fire. 

The situation arose from three Israeli teens being kidnapped and murdered last week - which Israel blames Hamas for, and the subsequent murder of a Palestinian teen, which Hamas claims was retaliatory action by the Israelis.

As we've seen a thousand times before - violence escalation in the Middle East almost always causes fear based price increases. Luckily, we saw no such movement today, as the market continued decline. Markets aside, hopefully the situation comes to some sort of resolution soon - preferably a long standing agreement that will stop the unecessary violence in the area.  

 

 

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Topics: RBOB tumbles, Libya, Iraq, ISIS, Hamas, Israel

BREAKING - Iraq Escalates - Militants Seize Tikrit, Target Baiji Oil Refinery

Posted by Kelly Burke on Jun 11, 2014 3:05:34 PM

Map of Iraq

(Image credit: Wikimedia Commons 18:57 June 11 2014)

CNN is reporting that ISIS (the Al Qaeda breakoff group that seized Mozul, Iraq yesterday) has gained "nearly complete control of the Northern city of Tikrit" - Parts of the town of Baiji have reportedly been seized as well - this is the site of the largest oil refinery in Iraw. At the moment the Baiji Oil Refinery is reportedly still under Iraqi military control but seizure of the town raises both international relations issues and supply concerns. If militants seize the refinery expect to see chaos in the markets.

You can follow the story in depth  on Reuters here: http://www.reuters.com/article/2014/06/11/us-iraq-security-idUSKBN0EM11U20140611 

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Topics: Brent Crude, Baiji Refinery, Iraq, ISIS

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