Following last week’s massive inventory build (and hope for improved gasoline demand), API reports another much bigger-than-expected build (Crude +9.94mm versus +3.5mm exp) and WTI and RBOB prices tumbled.
Crude +9.94mm (+3.5mm exp)
Cushing -1.27mm (+500k exp)
This wil be the 6th weekly build in a row for crude (and 3rd week of major builds)…
If the DOE data is anything loike the API data then this will be a new record for US crude inventory…
Press reports suggest that China’s central bank has ordered banks to limit new loans in Q1.
Fitch revised the outlook on Nigeria’s B+ rating from stable to negative.
Russia announced details of the FX purchase plan.
Brazil’s central bank confirmed it will simplify the reserve requirement system for banks.
S&P cut the outlook on Chile’s AA- rating from stable to negative.
Mexican announced another hike in fuel prices will take place on February 4.
Mexican President Pena Nieto canceled a planned meeting with President Trump as tensions flare
In the EM equity space as measured by MSCI, Mexico (+5.1%), Russia (+4.5%), and Poland (+4.0%) have outperformed this week, while UAE (-1.5%), Hungary (-0.1%), and South Africa (flat) have underperformed. To put this in better context, MSCI EM rose 2.2% this week while MSCI DM rose 1.1%.
In the EM local currency bond space, Colombia (10-year yield -17 bp), the Philippines (-16 bp), and Peru (-10 bp) have outperformed this week, while Poland (10-year yield +18 bp), South Africa (+13 bp), and Korea (+7 bp) have underperformed. To put this in better context, the 10-year UST yield rose 3 bp this week to 2.50%.
In the EM FX space, MXN (+2.7% vs. USD), CLP (+1.1% vs. USD), and ZAR (+0.9% vs. USD) have outperformed this week, while TRY (-2.7% vs. USD), HUF (-0.7% vs. EUR), and COP (-0.4% vs. USD) have underperformed.
Press reports suggest that China’s central bank has ordered banks to limit new loans in Q1. The PBOC reportedly emphasized its concern about mortgage lending. Reports also suggest that it may make some lenders pay more for deposit insurance. If reports are true, then we would expect the economy to slow as we move through 2017. For now, China is not one of the major market drivers but this news would clearly be negative for risk and EM.
US oil production has turned a corner after a long period of weak petroleum prices, the government said, with volumes rising for the first time since early 2015.
The Energy Information Administration forecast that oil output from the US will increase 1.3 per cent to 9m barrels per day in 2017, abandoning an earlier prediction of a 0.9 per cent fall.
In the first forecast for 2018 in its monthly Short-Term Energy Outlook, the statistical agency said US crude production will rise another 3.3 per cent, or 300,000 b/d, to 9.3m b/d. Production hit bottom last September, EIA said.
“The general decline in US crude oil production that began almost two years ago is likely over, as higher average oil prices and improvements in drilling efficiency are giving a boost to output,” said Adam Sieminski, the EIA’s administrator.
Companies are going to face a potentially peculiar situation following demonetisation, if the recently released inflation data are any indication. While a demand slowdown following the cash crunch could force producers to either cut or hold prices, their input prices are tending to go up owing to rising global commodity rates.
Latest data revealed retail inflation touched a two-year low of 3.63% in November, while wholesale price inflation eased to 3.15% from 3.39% in October. However, the Thomson Reuters/CoreCommodity CRB Commodity Index, which tracks the movement of 19 major commodities, has advanced 11.1% in the past one year and 8.6% so far in 2016.
Pronab Sen, former chairman of the National Statistical Commission, told FE: “The demand slowdown following demonetisation should put a downward pressure on prices, while the increase in input prices due to rising global commodity rates will put an upward pressure on prices. And what the net effect will be is very difficult to predict now. But companies may have to recalibrate their (pricing) decisions accordingly.”
Key global oil-producing countries’ decision to cut back on output has already driven up crude oil prices. Also, although China’s appetite for raw materials has been strained since last year, a renewed focus on manufacturing (along with services) by the US under President-elect Donald Trump has only complicated outlook of global commodity demand. “As more firms shift from the informal to the formal sector following demonetisation, “there is also a risk that tax increases are passed to consumers,” Nomura’s Sonal Varma said.
With oil prices surging to 17-month highs following this weekend’s OPEC-NOPEC deal and Saudi promises to cut still more, many Wall Street analysts are skpetical with Goldman Sachs warning that the Saudis are wrong to think U.S. shale production won’t respond to higher prices. However, Nomura and Bernstein see little threat to OPEC from rising U.S. shale production in 2017.
As The Saudis enabled yet another major short-squeeze… (Money managers slashed short bets on lower West Texas Intermediate crude prices by the most in five years after OPEC’s Nov. 30 accord to reduce supply.)
OPEC’s first production cuts in eight years will be a mixed bag for Asia, with the region’s few oil exporters celebrating and just about everyone else fretting.
The planned cuts are particularly worrying for Southeast Asian economies losing steam as China’s growth slows. India also has cause for concern. The country saw its gross domestic product rise 7.4% on the year in July-September, faster than the 7.1% in the previous quarter, but the government’s surprise demonetization of 500- and 1,000-rupee banknotes is expected to affect the economy well into next year.
U.S. stocks rose Monday as investors sent the Dow Jones industrial average to another record high. Banks put up some of the biggest gains, as did technology companies, which have been mostly left out of a post-election rally. Energy companies were higher as the price of oil reached its highest level since July 2015. Small-company stocks continued to outpace the rest of the market.
The Dow Jones industrial average rose 45.82, or 0.2%, to close at a record 19,216.31. The Standard & Poor’s 500 index gained 0.6% to 2204.71 and the Nasdaq composite index rose 1% to 5308.89.
Small-company stocks again outpaced the rest of the market as the Russell 2000 jumped 1.8%. Thanks to a big rally in November, the Russell is up 17% this year, or more than twice as much as the S&P 500. Smaller companies, which are more domestically focused than large multinationals, could stand to benefit more than larger companies from a pickup in U.S. growth.
Oil prices rose for the fourth day in a row. The gains Monday were modest, but oil prices haven’t been this high since July 2015. Benchmark U.S. oil rose 11 cents to $51.79 per barrel in New York. Brent crude, used to price international oils, gained 48 cents to $54.94 a barrel in London. The price of oil has surged since OPEC countries finalized a deal that will trim oil production starting in January.
More big gains for Goldman Sachsand Chevron helped pull the Dow Jones industrial average to another record high Thursday even as other indexes fell.
Ford and General Motors climbed after they announced strong sales in November.
At the 4 p.m. ET close, the Dow stood at 19,191.93 a gain of 0.4% or 68 points — and about 40 points above the record closing high it set Friday.
The Standard & Poor’s 500 index fell 0.4%. Taking a pounding was the Nasdaq composite, which lost 1.4% as technology companies like Facebook and Google’s parent company, Alphabet, sank. Health care companies slipped.
Oil prices continued to rise and reached their highest since mid-October. Benchmark U.S. crude picked up 3.3%, to $50.85 a barrel in New York after it jumped 9.3% Wednesday.
The price of oil had soared Wednesday after the members of OPEC, which collectively produce more than one-third of the world’s oil, agreed to a small cut in production starting in January. The price of oil has mostly traded between $40 and $50 a barrel since early April. It dipped as low as $26 a barrel in February.
Bond prices continued to fall. That yield on the 10-year Treasury note rose to 2.44% from 2.38%, its highest since July 2015.
Stocks are following the pattern that has held since the presidential election. Banks are rising as investors expect interest rates to increase, which will help banks make more money from lending. Industrial and materials companies are moving higher on the prospect of increased spending on infrastructure. Technology stocks are falling. A strengthening dollar could hurt their sales outside the U.S. Stocks that pay large dividends, like utilities and real estate companies, are also down. Those stocks become less appealing to investors seeking income when bond yields climb.
The Dow Jones industrial average ended up fractionally Wednesday after a big jump in oil prices on word of an OPEC oil deal.
Tech stocks took a hit as the major indexes ended mostly lower to cap a wild month.
The Dow lost considerable steam, ending up a mere 2 points and about 29 shy of its record closing high of 19,152.14. Earlier in the day, it and the S&P 500 topped their closing records, both set Friday, before scaling back. The S&P 500 wound up in negative territory, down 0.3%
Losing more altitude is the Nasdaq composite, which fell 1.1%.
The price of benchmark U.S. crude jumped as much as 9%m ending about a dime over $49 a barrel after OPEC countries moved toward finalizing a deal to reduce production.
Among energy companies, Devon Energy (DVN) jumped 14.6%, the biggest gain in the Standard & Poor’s 500 index.
With less than a week to go until the much anticipated OPEC meeting in Vienna on November 30, the oil exporting cartel still seems unable to determine the terms of production cut quotas, who will be exempt from cutting, and even who will participate. According to Reuters, in the latest twist to emerge, as OPEC tries to find the sweet spot for production that reduces the oversupply of crude, the organization will ask non-OPEC oil producers to also make big cuts in output, as it seeks to share the burden of declining output and prevent market share gains by non-OPEC nations.
The oil minister of Azerbaijan was quoted as saying the cartel may want non-OPEC producers to cut output by as much as 880,000 barrels per day (bpd). “It could be expected that OPEC members may ask non-OPEC countries to cut production volumes for the next six months starting from Jan. 1 2017 … by 880,000 barrels from the total daily production,” Azeri newspaper Respublika quoted the country’s oil minister, Natig Aliyev, as saying.
Reuters countered that according to an OPEC source the group had yet to decide on the final figures to be discussed on Nov. 28, when OPEC and non-OPEC experts meet in Vienna. As previously reported, OPEC is expected to discuss production cuts of 4.0-4.5% among its members at the Vienna meeting to comply with the roughly 1.2mmbpd reduction as set forth in the Algiers meeting which expects total OPEC output of 32.5-33.0mmbpd, but Iran and Iraq still have reservations about how much they want to contribute.
A cut of 80,000 bpd would represent less than 2% of current total non-OPEC output.