Energy Market Updates

Continuing fallout over the downed Malaysian jetliner led to increased international tensions today (deja vu?). Russia called US accusations that it supplied the anti aircraft missles responsible "groundless". President Obama insisted that Russian involvement warranted further sanctions by Western nations. And thats what we saw happen this afternoon - Canada issued new sanctions targeting financial and energy related companies (much like the US sanctions from last week) and instituted travel bans on certain individuals. 

Brent was obviously up on the news and continuing tensions that undermine stability in the markets and international relations in general. WTI was up today as well. ULSD closed up a whopping 0.0448 to 2.9157, despite distillate inventories hitting 125.9 million barrels (up 1.64 million barrels) . Gasoline took an unexpected jump as well today - after initially hanging flat to slightly down this morning and closing down 0.0233 yesterday. Inventories have been up on gas, while demand is uncharacteristically low for mid-sumer  (aka mid driving season). In fact, gasoline inventories hit a four week high - but demand hit a 6 week low, and prices still went up. Funny business. 

Additionally, its just breaking this afternoon that Israel has rejected a cease fire proposition brokered by the US, so expect ongoing turmoil there for the time being.

In the broader markets, - stocks slid basically across the board globally, with the exception of the S&P 500 and the Shanghai Index. US Treasury Yields were down and the dollar was up after dissapointing durable goods order numbers - poor numbers on durable goods indicate that there is a lack of capital expenditure still ongoing which is presumably due to a lack of confidence in the stability of the economy.

All in all another busy week with a lot of balls still in the air, and next Friday we can expect the Jobless Report, and the Fed makes a scheduled announcement on their continuing direction next Thursday,,,,, in other words the saga continues! 

Have a great weekend everyone!

Futures ticked down yesterday on positive domestic economic news, even as international turmoil escalated. Inventories were expected to show draws, but other economic data out indicates the economy is continuing to recover. The CPI (consumer price index) was up 0.3%, and existing home sales came in up 2.6%, both of which are good indicators. Today, gasoline continued downward, closing down -.0206 but ULSD inched up a little to 2.8754 (up 0.0212 on the day). Not too shabby considering all the insanity internationally. 

Here's a quick rundown of the international issues that could play out in the markets in the coming days:  

In the wake of the tragic Malaysian aircraft crash, tensions between Russia and the West have hit almost Cold War proportions. Russia and Ukraine both wasted no time blaming the other for causing the crash, and the US jumped in and immediately implicated Russian Seperatists in Ukraine for launching the fatal missle. France and the US are proposing further sanctions, with the US sanctions targetting financial and energy companies by way of denial of bonds with a 90 day plus maturity. 

Today, two Ukrainian fighter jets were shot down by Russian seperatists, lending creedence to the theory that seperatists downed the Malaysian jet, and perhaps implying that sanctions against Russia may be escalated, which could potentially have an impact on markets.

Israeli ground troops invaded Gaza earlier this week after a ceasefire agreement was violated by Hamas in under 4 hours. Tuesday afternoon the FAA grounded all US flights to or from Israel for at least 24 hours on concerns of a Malaysian like incident after a rocket struck within a mile of Israels largest airport. Israel called the US flight cancellations a "coup for hamas", at least on a PR level, which isnt helping urge reconsideration of a cease fire on either side.

Hopefully, in addition to international crises being negotiated, the Domestic news will continue to suggest a strengthening economy and mitigate price spikes.... Stay tuned! 

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.