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Tue, 25th April 2017

Anirudh Sethi Report

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Archives of “petroleum” Tag

Private oil inventory data shows larger than expected build in crude stocks

The official data is today morning (US time), but for now the private survey is out (available to subscribers to their service)

Reuters polling has the consensus expectation for U.S. crude oil stocks to show a build of 1.2 million barrels in this most recent week
More:
  • Gasoline inventory showed a smaller than expected draw

ARBITRATION ON COMPENSATION DEMAND IN RIL-ONGC ROW

A three-member arbitration panel has started hearing validity of the Government’s demand of $1.55 billion as compensation from Reliance Industries for “unfairly” producing ONGC’s gas.     The panel, headed by Singapore-based arbitrator Prof Lawrence Boo, had its first hearing on March 3 where the timetable was drawn, sources privy to the development said.

RIL will first file its statement of claim, followed by a statement of defence by the Government. This will be followed by rejoinders, counter-rejoinders and oral hearing, sources said, adding that the panel plans to wind up the hearing in a year.

The Central Government has named former Supreme Court judge G S Singhvi as its nominee on the three-member arbitration panel while RIL and its partners BP Plc of the UK and Canada’s Niko Resources have named former UK High Court Judge Bernard Eder to the panel.

RIL-BP-Niko had slapped an arbitration notice on November 11 last year.

This was against the oil ministry’s November 3, 2016 notice to RIL, Niko and UK’s BP seeking $1.47 billion for producing about 338.332 million British thermal units of gas in the seven years ended March 31, 2016 that had seeped or migrated from the Oil and Natural Gas Corporation’s (ONGC) blocks into their adjoining KG-D6 in the Bay of Bengal.

Watch These Geopolitical Flashpoints Carefully

Anyone who has been involved in alternative geopolitical and economic analysis for a decent length of time understands that the establishment power structure thrives according to its ability to either exploit natural crises, or to engineer fabricated crises.

This is not that hard to comprehend, but for some reason there are a lot of people out there who simply assume that global sea-change events just happen “at random,” that the elites are stupid or oblivious, and that all outcomes are a matter of random chance rather than being directed or manipulated.  I call these people “intellectual idiots,” because they believe they are applying logic to every scenario but they are sabotaged by an inherent bias which causes them to deny the potential for “conspiracy.”

To clarify, their logic folds in on itself and becomes faulty.  They believe themselves objective, but they abandon objectivity when they staunchly refuse to consider the possibility of covert influence by organized special interests. When you internally dismiss the possibility of a thing, no amount of evidence will ever convince you of its reality.  This is how the “smartest” people in the room can end up being the dumbest people in the room.

US to ban large electronic devices on flights from 8 Middle Eastern nations

Airline passengers traveling from eight Middle Eastern nations, including Jordan and Egypt, will be barred from carrying large electronic devices into the main cabin under new regulations from the Trump administration.

The new rules, which come into effect on Tuesday, also apply to Saudi Arabia and the United Arab Emirates, according to a US official. Passengers from the eight countries will have to check laptop computers and other large devices, such as tablets, into the hold on all flights bound for airports in the US. But the restrictions will not apply to flights leaving the US for the same countries, according to the official, who requested anonymity.

The move marks the latest attempt by the Trump administration to tighten security after Mr Trump vowed during the presidential race to do more to tackle terrorism. It comes one week after his administration issued a revised travel ban that temporarily bars citizens of seven largely Muslim countries from entering the US. The revised order, like the first one, has been blocked by the courts, preventing implementation for the time being.

Overnight US Market :Dow closed -8.50 points.Nasdaq Unchanged

Nasdaq unchanged.  Dow down about -0.04%

The S&P index is ending the day down about -0.20% on the day to 2273.50. The high reached 2379.55. The low 2369.66.
The Nasdaq was unchanged at 5901.50. The high reached 5915.12. The low 5888.
The Dow was down about 8.5 points to 20906. The high reached 20955. The low extended to 20885.
In other markets:
  • 2 year yield fell -2.6 bp to 1.288%
  • 5 year yield fell -3.1 bp to 1.986%
  • 10 year yield fell -3.7 bp to 2.462%
Spot gold is up $5 to $1234.39. The high reached 1235.78. The low 1229.15.
WTI Crude oil is trading at $48.21, down -$0.57
The snapshot of the major currencies shows the NZD is the strongest while the GBP is the weakest (PM May will trigger Article 50 on March 29th). The USD was mixed with the dollar gaining against the GBP. It was down against the AUD and NZD and little changed against the other major currencies.

Oil Shorts Soar By 2nd Most In History As OPEC Hope Fades

During a week that saw WTI crude prices erase all post-OPEC-production-cut-deal gains, after the Saudis admitted ‘cheating’ (but rapidly back-pedalled), oil speculators added almost 80,000 contracts to their short positions – the 2nd most in 34 years.

This surge in shorts reduced the massive record net long crude positioning by the 2nd most in history – but clearly it remains extremely one-sided still…

Market Doubts of Three Fed Hikes This Year Caps Dollar

Bringing forward expectations of a Fed hike from May-June to March was worth something for the dollar, but to get more now, the market may need to recognize the risk of three (or more) hikes this year.  With the strong February jobs growth and a 2.8% year-over-year increase in hourly earnings, rarely does the market’s confidence in an event surpass current expectations for a hike on March 15.
However, the market sees around a one-in-three or a one-in-four chance of a third hike this year. The risks for the updated forecasts from the Federal Reserve seem asymmetrically tilted higher, more rate hikes than fewer by more members.  The hawkishness of regional presidents may be underestimated.  The data and the global climate are conducive for expediting the normalization process.  The hawks will likely feel vindicated by recent developments and may press their case with more vigor.
The focus of the Fed has arguably shifted.  Previously, the issue was whether the data would confirm that the economy was evolving toward the Fed’s targets.  It did.  Rather than focus on the data points per se, officials appear more confident of the direction and resilience of the economy and prices.  They now are looking for opportunities, which helps explain the campaign to prepare the market for the March 15 move.
Still, the dollar’s technical tone has deteriorated, and the risk is on the downside over the next several sessions.   Our working hypothesis is that the dollar’s recovery that began in early February against most of the majors ended and a correction has begun,   For the Dollar Index, this means potential toward 100.75 and possibly 100.40.  The former is the 50% retracement of that rally and coincides with the 100-day average (~100.80). The latter is the 61.8% retracement.  Alternatively, if the Dollar Index has carved out a double top near 102.25, the neckline is around 101.20 (38.2% of the rally is ~101.10).  On a break of the neckline, the measuring objective is 100.
The euro’s pre-weekend rally saw it surpass the 50% retracement objective of its decline from the February 2 high near $1.0830.  That retracement was around $1.0660, and the 61.8% retracement is closer to $1.0700.  The euro’s five-day moving average crossed above the 20-day average for the first time in a month.  The single currency may be tracing out a double bottom at $1.05  The neckline is $1.0630.  The measuring objective is around $1.0760.

Overnight US Market :Recover into the close but close near unchanged levels

The US major indices are ending the day with smalll gains.

  • S&P index +1.89 points or 0.08%
  • NASDAQ composite index +1.257 points or +0.02%
  • Dow industrial average +2.46 points or +0.01%
In other markets:
  • Spot gold $1202.13, down $6.20 or -0.51%
  • WTI Crude oil trading at $49.74. That is down $-.54 or -1.07%. The price has bounced off key support at $48.68/72 area where the 200 day MA and 50% retracement was found.
IN the US debt market
  • 2-year note 1.366%, +1.2 basis points
  • 5-year note  2.126%,, +3.3 basis points
  • 10 year note 2.562%,, +3.6  basis points.. The high in the 10 year reached 2.605% just short of the December high of 2.61%
  • 30 year bond 182%, +3.3 basis points

Weekly US crude oil inventories +8209K vs +2000K expected

Weekly inventory and production data from the Department of Energy

  • Prior was +1501K
  • Inventories have risen for 9 straight weeks
  • Gasoline -6555K vs -1987K expected
  • Distillates -2676K vs -1000K expected
  • Production +0.6% w/w to 9.088mbpd

The large increase in oil inventories was largely offset by bid draws in gasoline and distillates. If anything, this report is less bullish than the API numbers. It took a moment, but crude jumped about 20-cents on the headlines.

Here’s what API reported late yesterday:

  • Crude +11600K
  • Gasoline -4960K
  • Distillates -2900K

Inventories are nearly 10% higher than they were at this time last year.

There are no free rides for non-OPEC producers taking advantage of OPEC cuts

Saudi energy minister on the wires

  • Saudi output is below 10mbpd
  • There is cause for cautious optimism in the oil market recovery
  • Fundamentals are improving
  • There are concerns that worldwide investment in energy is falling behind supply development needs
  • OPEC is monitoring markets to evaluate the results of the agreement and will act later
  • Peak oil demand projections are misguided and say they threaten needed investment

He’s speaking at the CERAWeek conference.