Crude

Saudis Offer To Cut Production By 500,000 Barrels: "The Oil Market Situation Is Much More Critical"

Saudi Arabia offered to cut its oil output to January levels, as OPEC members seek ways to stabilize crude prices at talks this week in Algiers.“Saudi Arabia is ready to freeze production at the January level,” Boutarfa said, calling the offer “an interesting step.” Saudi Arabia pumped a record 10.69 million barrels a day in August compared with 10.2 million in January, suggesting the Saudis are willing to cut total output by half a million barrels. 

Iran Is Unlikely To Accept Saudi Oil Cut Offer: Bloomberg Analyst

With the oil market roiled by the latest unconfirmed report by Reuters, which cited three anonymous sources as claiming that Saudi Arabia was ready to cut production if Iran freezes output, everyone has been focused on the follow up, to see if there is either an official confirmation, or an unofficial denial. While we wait, however, Bloomberg oil strategist Julian Lee released a quick analysis moments ago in which he explains "why Iran is unlikely to accept the Saudi oil cut offer." 

Global Central Bank-Driven Stock Rally Fizzles; Crude Rebounds On Saudi Oil Production Cut Report

Until minutes ago, this week's rebound in global equities appeared to be running out of steam as oil retreated from a two-week high and a dollar slide ended.  However, as noted just around 6am, Reuters reported, citing as it usually does various "anonymous sources", that in a radical departure from its long-held policy of not cutting production, Saudi Arabia was prepared to cut production on condition that Iran freezes output, which led to an instant spike in crude.

Spot The Odd (Hedge Fund Strategy) Out

The trend is your friend... until the end. August was a great green month for many hedge funds (with Multi-Strategy and Event-Driven strategies doing best). But, as RBC notes., 'trend-following' CTA/Managed Money funds "got smoked."

Why Futures Are Surging Again: RBC Explains

And just like that: risk-parity / various other leveraged ‘target risk’ strategies (S&P Target Risk Aggressive Index saw its best day since first week in July yesterday) are back in the driver’s seat, as the Fed and BoJ went back to their “happy place” of a vol-suppression kind of world.  That is exactly who / what we are seeing in equities futures, UST futures / curves right now.  Lever it up again!

Soothing Fed Sends Global Stocks, US Futures, Commodities Higher

Following the Fed's "hawkish hold" and the BOJ's "confused contradiction", global risk (and non-risk) assets got the green light, and as a result stocks and bonds rallied in Asia and Europe, with US equity futures rising another 0.4%, advancing with oil and industrial metals, as iron surged in Chinese trading.

Crude Extends Gains After Bigger Than Expected Inventory Draw (Despite Production Rise)

Following last night's surprisingly large API-reported crude draw, DOE confirmed the drop with a 6.2mm draw (less than API's 7.5mm though) with some wondering if the Colonial Pipeline closure affected inventories. Cushing saw a notable build and Distillates inventories rose for the 6th week in a row. While gasoline inventories fell (Pipeline?), production rose for the second week in a row.

Frontrunning: September 21

  • Bank of Japan's policy reset muddies markets' risk mood (Reuters)
  • BOJ overhauls policy focus, sets target for government bond yields (Reuters)
  • BOJ Shifts Policy Framework to Targeting Japan’s Yield Curve (BBG)
  • Fed Focus Turns to Dots as Hike Odds Fade: Decision-Day Guide (BBG)
  • Oil jumps after surprise drop in U.S. crude inventories (Reuters)

BOJ Needs To Go All The Way

The BOJ does have a track record of surprising markets. If it doesn’t want to see USD/JPY collapse, exacerbating the nation’s economic struggles, then it needs to ensure the shock is a dovish one this time. Which maybe what the banks are negatively expecting...Even as Goldman warns "don't expect much if anything, at all."

WTI Crude Jumps After Surprise Massive Inventory Draw

Following last week's unexpected draw (following the huge storm-driven draw from the week before), traders expected a 3.25mm build this week but API reported another surprise draw (massive 7.497mm draw!) . The Colonial pipeline leak/shutdown likely had some exogenous effect as Cushing saw a large build but Gasoline drewdown as Distillates inventories rose. WTI prices are surging back to yesterday's highs on the surprise.

How Big An Impact Will A Rate Hike Have On Oil Prices?

Oil prices could be facing a significant jolt after Federal Chair Janet Yellen, in her annual speech at the Jackson Hole economic symposium in Wyoming, said that the case to increase interest rates had strengthened. The extent of the jolt that may be felt is far from certain however.

Janet Yellen's "Footnote 8" - The Negative Rate 'Smoking Gun' That Everyone Missed

Yellen’s Jackson Hole speech was widely reported, so we’ll spare you the summary. What wasn’t widely reported was her Footnote 8. Yellen cited approving a mathematical formula that could put interest rates on autopilot. The Fed hasn’t yet followed the rule, but its presence in Yellen’s paper suggests its use is on the table. Footnote 8 lays the groundwork for negative rates.