Stocks Rebound on Election, Energy Shares Continue to Falter on Cheap Crude

Posted by Kelly Burke on Nov 5, 2014 9:51:45 AM

Stock market numbers on a digital board

The Dow & Nasdaq were up in pre-market trading on news of a Republican sweep last night, and stocks are continuing to rebound this morning after Tuesdays drop off. The exception to this rule being energy shares, which are pulling the S&P down on the back of plummeting Crude prices. 

The ADP report on October job creation came in at 230K, 10K above the projected number. Strong payroll numbers for October and September, continually falling initial jobless claims and a surprisingly good Q3 growth number (3.5%) are all good signs for the overall economy.

However, there is still the factor of weakening global growth and demand, which will probably keep the domestic growth pace a lot slower than we'd all prefer. The Q4 growth number is expected to be much less exciting than Q3, thanks to global concerns. 

We saw WTI touch on a 3 year low yesterday on the back of the Saudi price cuts, oversupply, and booming production in the US. This is pulling energy shares down and impacting oil field companies and major industry players, as Crude starts to touch levels that make expensive shale play exploration an increasingly less profitable proposition.

 The Platts pre-report on US inventories is projecting the EIA report will show another build in Crude of about 1.2million barrels. Currently the NYMEX is relatively flat ahead of the EIA report's scheduled release at 10:30 this morning.

We should see then if the analysts got it right, and what, if any, impact the stock data will have on pricing moving forward. 

 

 

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Topics: US Energy Boom, CRUDE, WTI Crude, EIA Inventories, stock market, Election Results

Election Day Free Fall for WTI, Stocks

Posted by Kelly Burke on Nov 4, 2014 11:31:54 AM

Line charts depicting the stock market scattered on a table

Everything is dropping across the board today - WTI is maintaining itself under the $80 benchmark (currently -1.76 at 78.78/bbl), Gas and ULSD are both down over 5 this morning on the NYMEX and the Dow and Nasdaq are both following suit into the red. 

So whats going on?

The reason the dropoff has escalated today in particular is likely due to the Saudi announcement that they will discount Crude imported to the US, which has really ramped up the economic pressure on fracking companies.

It appears the Saudi price pressures are starting to take effect on American production, with Chevron and Shell both announcing scale backs in popular shale plays and exploration proposals.

The estimated cost per barrel extraction in the US is around $60, which is about double the production cost for the Saudis. So when WTI is getting toward the mid 70's/bbl the profitability starts to drop off, and quickly. 

Additionally, the trade deficit is at a 4 year high, as global growth remains at a crawl, further dropping demand and therefore prices in the face of ever increasing supply. Slow global growth demand plus a strong dollar put a damper on exports. Additionally, construction spending fell in September, so the economic outlook for Q4 aint looking so good, and seems to be bringing the bears out across the board.

Stay tuned!

 

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Topics: Fracking, OPEC, WTI Crude, stock market

Goldman Sachs Cuts Price Forecast for Oil: Projects $75/bbl Benchmark

Posted by Kelly Burke on Oct 27, 2014 4:38:05 PM

Line charts depicting the stock market scattered on a table

Goldman Sachs has revised its projected oil prices for 2015 to $75/bbl for WTI and $85/bbl for Brent Crude, in response to ramped up supplies and slow projected global economic growth. 

Production from the US, Brazil, and the Gulf is projected to increase almost 1 million bpd, combined, and OPEC production is assumed to remain more or less stable - with gains in Iraqi production and drops in Libyan output essentially cancelling one another out. 

Like wev'e talked about, OPEC may curb production to offset the decline at some point, and analysts seem to think 75 may be the price point at which US shale production slows and spurs OPEC to drop production. Its unlikely they will make major moves until US production shows signs of slowing against low margins, or thats the prevailing theory, anyway. 

Oil was down today on that and other ho-hum economic news, and stocks fell in tandem. Europe settled 2.2 billion in bond purchases today in a preventative move against deflation, and the re-election of Brazilian President Rouseff reversed the hope some had that the country would move in a more positive, business-friendly direction. 

On the NYMEX, ULSD closed off -.0066 and gas settled out at 2.11702, down -.0115 for the day. 

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Topics: Goldman Sachs, Brent Crude, OPEC, WTI Crude, stock market, shale

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

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