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Markets Soar on Vaccine News, Presidential Transition

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Final answers to lingering questions shot markets up today - Oil markets hit an 8 month high and the stock market soared,  with the Dow breaking 30,000 for the first time. Airlines, Cruise Lines, and Energy stocks all pushed up on continuing positive news regarding a COVID-19 vaccination. 

In intraday trading, WTI surged over 4 % to $44.80 (the last time we saw the $45 benchmark hold was in March, prior to both the Saudi/Russian price war and the expanding of COVID into a full blown global pandemic. In other words, its been quite some time. Who can even remember life before lockdowns started?).

Since November 9 (first vaccine announcement) Crude has gained ~15% and Brent is in backwardation, another positive sign. 

ULSD & RBOB both traded up over .05+ the majority of the trading day. At the close, ULSD was up +.0490 to 1.3595 for December & +.0484 to 1.3642 for January. RBOB gained +.0542 for December to 1.2582, and +.0539 for January to 1.2510. Crude closed at $44.91/bbl - juuuuuuust under that $45 benchmark. 

Earlier in the month (November 9) we saw markets jump on the announcement by Pfizer that they had developed a 90% effective vaccine. AstraZeneca and Moderna have also announced success on their iterations of a vaccine, one of which has the potential to solve some of the logistical issues regarding cold storage transport posed by the initial vaccine. Obviously, a vaccine means markets are hopeful that we will see a transition back to "normal" sooner rather than later, and the rally in industries particularly hammered by lockdowns, including air travel and general transportation would seem to bear that out. 

The other factor pushing markets today is the official start of the transition of power to the Biden Administration. Given the legal challenges being raised by the Trump Administration regarding vote counts, there was substantial uncertainty around the transition, and if there's anything the market hates, its looming questions without answers. It seems that the clarity is boosting confidence.

Lest we get overly optimistic however, it's important to note that although vaccine news is good news - none of the vaccines announced have been approved for general use yet. We are also still in a surge of COVID cases right now and there is no timeline on when a large enough contingent of citizens will be vaccinated in order for restrictions to begin easing. Goldmann Sachs & JP Morgan have revised economic expectations due to surging, New York City has closed schools again, and even in Massachusetts we are seeing field hospitals being reopened to handle expected increases in cases. All of this to say while today was great for 401(k)s, it is probably premature to be overly optimistic about the next few weeks to months. 

Despite all the craziness of 2020, we're Thankful to be here still working for our customers. We hope you have an amazing and relaxing (social distant) Thanksgiving. Enjoy the long weekend! 

 

 

 

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Oil & Stock Markets Plummeting on Trump Travel Ban

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Oil opened down 6% this morning, and has continued to slide. We are currently off ~7.9% at time of writing (10:30am)

Crude oil (both Brent & WTI) have shed almost 50% of their price since the beginning of 2020. Currently, on refined products we are looking at ULSD -.0872 &  RBOB -.1907 (@ 10:30am)

In addition to the Saudi/OPEC price war, we now have yet another factor weighing on oil prices, which is the 30 day travel ban President Trump has imposed on European countries in an attempt to contain the Coronavirus.

The announcement sent stock markets crashing this morning (even worse than yesterday, when the DJIA entered bear territory).The so called "circuit breaker" kicked in to halt trading at 9:35am for 15 minutes.

The markets are now down ~8% - if they hit 13% another trading halt will kick in. 

The stocks being hit particularly hard are Cruise lines, airlines, etc - in other words, basically the stock market is setting demand expectations for major transportation companies extremely low - which means demand for oil products overall are an increasing concern. 

Obviously, this is developing as we are about 12 hours out from the original announcement, and the markets are open in full swing. You can follow developments here:  Business Insider 

(For specific live updates on the stock market itself versus meta analysis, go here: Stock Market Live )

 

 

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Price War! Oil drops 24% on Saudi Reversal & COVID Economic Carnage

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Oil markets were tumbling well before the open today, and unfortunately we didn't see that turn around at all through the course of the official trading day.

At the open, we were down -.2076 on ULSD, and -.2362 on gas and it only went downhill from there.

At the close, Crude settled at an incredible $31.13/bbl (down 24%!!), ULSD dropped -.2223 to $1.1629 & RBOB dropped .2521 to $1.1369.

Stock markets took a pounding today as well, dropping precipitously enough for trading to be temporarily halted when the Dow Jones Industrial Average dropped over 2,000 points after the open this morning. (Both the S&P and DJIA are down over 6% as of writing)

So what's going on?

In response to Russian refusal on the proposed OPEC production cuts, Saudi Arabia has completely changed course on cuts and announced they will not only be pumping at capacity starting April 1 (upon the expiration of the current cuts) but they are also additionally discounting by a reported 4-8 $ per barrel, with preferential pricing going to the US & Europe.

The move is meant to undercut other producers across the board  - somewhat reminiscent of the strategy employed to attempt to push out U.S. Shale production back in 2014-2016(ish) and retain market share at the expense of other producer nations (refresher/throwback on that here: 2015 - backstory on that strategy impact on Russia back then here as well: 2016 ) 

The thing is though, the math has changed substantially on both the Russian & US fronts in terms of capital on hand to withstand the drop in the case of Russia, and production cost and infrastructure in the case of the United States, so it will be interesting to see who blinks first. It's unlikely to be Russia, they announced they can withstand $25 oil for 2 years. (whether that is true or not remains to be seen)  

The second half of the equation today is that the ongoing Coronavirus outbreak is seriously dampening both global economic expectations, and oil demand. In particular, as US cases rise, concerns rise as well on economic impacts. Fear of the virus becoming a full on global pandemic are also in play now as Italy made the move to quarantine an entire region this weekend in an attempt to contain the spread. 

Basically, falling oil prices and falling demand paired with virus induced low global economic growth is igniting fears of a recession. In particular, the US, who has recently become a major producer and net exporter, could feel major impacts that we are not used to. 

Again, it's anyone's guess if we are seeing the bottom or not yet or how long it will take for the factors involved to reverse course. In the mean time, stay tuned (and wash your hands!)

 

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Oil Tanks 10% on No OPEC Deal & Continued Pandemic Fears

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Wild day on the markets today! Oil plummeted on news that the production cuts proposed at the OPEC+ meeting in Vienna were rejected by the "plus" contingent of the OPEC+ coalition - namely, Russia.

Current cuts will remain in place through March, but technically there is no agreement for continued production cuts past the 31st, which means its anyone's guess how production will be ramped up among OPEC+ nations (assuming another deal is not hammered out). Proposed cuts were contingent on Russian agreement and well... they said no. 

Upon the news, the market dropped 7% essentially immediately, and continued on down throughout the day, closing down 10%  - with WTI settling at $41.28/bbl (lowest it has been since August 2016!). ULSD dropped .1033 to settle at 1.3852, and RBOB dropped a whopping .1328 to close out at 1.3890.

The timing on this could not be worse, as global economic demand growth has been taking a pounding from the Coronavirus' impact on major economic players, specifically China. There was some indication in late February that the virus was being contained in terms of slowing new cases, but that appears to have been wildly inaccurate - infections have now surpassed 100K, and spread to over 93 countries, according to the CDC. 

The stock market was hit just about as hard as the oil markets today in the ongoing panic, despite positive jobs numbers and the signing of an 8.3 billion dollar epidemic relief package in the US aimed at ramping up efforts to contain and combat the virus, as well as develop a viable vaccine as soon as possible. The bill also includes SBA loan options for industries hit particularly hard by the outbreak (like airlines), which was in part meant to combat some of the economic fallout and panic - but today's stock market numbers would indicate it was not successful in that endeavor. 

All of this to say - it's anyone's guess if we have hit the bottom on pricing yet, and it's likely to be a day-by-day analysis until the pandemic fears subside... at which point global supply (and potential supply cuts) will again become the main driver.

Stay tuned! 

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

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

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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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Fed Uncertainty and Major Layoffs Spook Wall Street  

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Stocks are getting pummeled today in anticipation of Fed Chair Janet Yellen's scheduled 5 o'clock speech on the economy and Fed policy re: rate hikes. (Deja vu anyone?). 

Today Caterpillar announced that they will be both revising sales projections down and cutting 10,000 jobs by the end of 2018. That announcement is really crushing stocks, because Caterpillar is seen as an indicator of strength or weakness in the industrial and manufacturing sectors given their size and dominance in the sphere of heavy equipment. To the traders on the Street, less demand for Caterpillar implies fewer large scale construction projects coming online, which is obviously not good news for the economy.

Their announcement is also not a good sign for diesel usage increases, either,  which we need in the face of oversupply and the resultant continually dropping prices. 

On the other hand  - first time jobless claims were up 3,000 to 267,000, not a bad job market indicator, and new home sales beat estimates, both of which are positive signs. 

Ironically, what some analysts are saying is that these positive indicators signal that we can withstand an increase - and the panicked selling off is essentially coming from a concern about why we did not see the Fed move forward with the anticipated rate hike last week. If the market looks like it can accept it, then not passing the rate hike essentially implies the Fed is concerned about economic strength despite positive signs, and this is apparently making traders very nervous. 

On the commodities side, the EIA report out Wednesday showed inventory draws of 1.9mmb on Crude, draws of 2.1mmb on distillates, and a build of 1.4mmb on gasoline. We actually saw drops at the close however, despite the inventory draws, with WTI settling at 44.48 for November (Brent at 47.82), ULSD for October delivery closed out at 1.5056 (-.0264) and RBOB was down (-.0348) to 1.3816. 

Today, the NYMEX was mixed throughout trading - up on diesel, down on gas, neither straying too far from the open. At the close, ULSD settled up (+.0181) to 1.5237, and gas settled out (-.0164) to 1.3652.

Expect another possible crazy day tommorow, depending on how the Fed Speech goes, and how traders and analysts interpet its likely short term implications. 

Stay tuned!

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Lackluster Jobs Data Crushes Stocks, Crude

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CRUDE, ULSD, and RBOB are all trending downwards today in tandem with the Stock Market, after a less-than-robust Jobs Report out this morning. The report showed that the US added 173,000 jobs in August, a relatively far cry from the 220,000 anticipated (hoped for?) by the markets and economists.

According to some analysts, since the official unemployment rate fell to 5.1%,  the report is seen as potentially strong enough to push the Fed into following through with a September rate hike which accelerated sell offs. According to others, lackluster global economic signals are pushing the selling. I find the second assertion is more likely, but either way, the market looks poised to drop 3% on the week.

The past few weeks have seen wild volatility on Crude as well as the Stock Market. As the Wall Street Journal pointed out today - the close Tuesday marked 4 straight days of commodities trading with swings of at least 6% up or down in a row. For example, Monday for October closed up +.1101 on ULSD, and +.1020 on RBOB, then Tuesday more than erased those gains, closing out -.1233 on ULSD and -.1035 on gas. 

With the production level battles still ongoing with OPEC between the so-called "Fragile Five" and the Saudi's which so far hasn't had any curbing impact on output, and a lack of any real bright spots in the global economy, it's more probable than not that we will continue to see serious volatility for the time being. 

Stay tuned!

 

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

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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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Stocks Officially in Correction, Oil Trades Under $40

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WTI crashed below the $40 level this afternoon in trading, and clung right to the $40 line at the close, settling at $40.45. (ULSD was off -.0556 to $1.4624, and RBOB dropped -.0143 to $1.5449)

As discussed yesterday, domestic inventories going up pushed prices down towards $40. Today Baker Hughes announced more rigs going back online, for the fifth week in a row, which seems to be the proverbial straw that broke the camel’s back.

Stocks haven’t taken the news easy, either. US stocks hit their lowest point in a year, on oil price panic and deepening fears about the Chinese economy. The Dow Jones was down over 450 points as of 3:30pm – and over 530 points at the close. The bad news is that makes it in official “correction” territory which could further more panic selling on Monday. The S&P was down over 2% this afternoon - which pales in comparison to the market in China which dropped over 4%. Long story short, everyone’s stock positions got hammered today.

Another factor of a quick price drop on oil like we’ve seen since last June that is rarely discussed is the impact on jobs. This is kind of another anvil hanging over the economy’s head that could drop if oil gets to a critical low price. According to The Guardian's reporting, close to a quarter million people globally have lost their oil and petroleum related jobs, including approximately 35,000 in the US. Shell announced this week that it would lay off 6500 employees worldwide. Then there’s the financial cost. Their article on this portion of the equation is fantastic and thorough, you can read it here: The Guardian

Earlier this month we saw Venezuela and others pushing for an OPEC meeting to discuss changing supply to offset the crushing blow to their economies that the continued low pricing has been having. Yesterday, according to Reuters and the Wall Street Journal, the Algerian Oil Minister sent a letter to OPEC arguing the price has dropped significantly since they agreed on production levels, and is pushing for another meeting to reassess. So far, Saudi Arabia et al have stood firm, but it may be that they are forced to reverse at some price level as-yet-undetermined.  (You can read about that letter and OPEC in depth here: WSJ )

Hopefully we have some better news tomorrow - but it doesn't look good out there, folks. 

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