Bears vs Bulls, Buyside vs. Sellside and shorting oil with the USDEUR pair through the blochchain because of EU bank exposure and a NIRP-happy ECB.
Tuesday oil humor extends to Wednesday oil humor as WTI Crude algos key off yet another Doha headline and spike stops above yesterday's highs...
"we covered enough of the bonds and bought enough of the aluminium producer to effectively reduce our net equity exposure as close to zero as we could. When markets speak, we listen and the markets seemed to be speaking bullishly from the outset and especially after crude oil moved higher as noted above... we have chosen to become net market neutral but we’ll not likely become net long out or respect for that index and its history."
After a significant draw the previous week, API reported a large 6.22mm build overnight, now confirmed by DOE with a 6.63mm build. Cushing was expected to see a considerable draw due to the outage at TransCanada's Keystone crude pipeline outage and was almost triple expectations (-1.76mm vs -610k exp). A larger than expected draw in gasoline inventories and build in Distillates was also evident as Production data fell for the 11th week of the last 12 to the lowest since Oct 2014. Oil prices are tumbling...
With oil losing some of its euphoric oomph overnight, following the API report of a surge in US oil inventories, and a subsequent report that Iran's oil minister would skip the Doha OPEC meeting altogether, the global stock rally needed another catalyst to maintain the levitation. It got that courtesy of the return of USDJPY levitation, which has pushed the pair back above 109, the highest in over a week, as well as a boost in sentiment from the previously reported Chinese trade data where exports rose the most in over a year, however much of the bounce was due to a favorable base effect from last year's decline. Additionally, as RBC reported, the 116.5% y/y increase in China’s reported March imports from HK likely reflects the growing trend of "over-invoicing", which is merely another form of capital outflow.
Chinese Stocks, Yuan Rally After Exports Rebound From February Bloodbath, Imports Fall For 17th Month In A RowSubmitted by Tyler Durden on 04/12/2016 22:13 -0400
After February's bloodbath in Chinese trade data, expectations were for a scorching hot rebound in March. With PBOC's Yuan 'basket' devaluation accelerating throughout this period it should not be surprising that Yuan-based China exports soared and imports beat expectations (but fell 1.7% - extending the losing streak to 17 months in a row). For now, oil and stock (US and China) prices are rising in reaction to this "good" news. Offshore Yuan is drifting stronger against the dollar. However, as China customs noted, March's export bounce reflected more base effect than increased demand.
Massive borrowing to pay the interest is everywhere and always a sign that the the end is near. The crack-up phase of China’s insane borrowing and building boom is surely at hand.
Following last week's 'biggest inventrory draw in 3 months', expctations were for a 1mm build this week, so when API reported a huge 6.2mm build. Perhaps slightly offsetting this surge is a 1.93mm draw at Cushing (after Genscape forecast a 1mm draw at Cushing this week and expectations were for a 800k draw). After a manic buying day in WTI, oil prices are plunging after hours...
Despite the day's rampacious rally in stocks and crude aftwer "unidentified sourtces" said a Russia-Saudi deal was done, Russia's Dmitry Peskov just issued a statement that "there is hope" for a deal at Doha. This sent stocks and crude jumping once again... even though we suggest "hope" for a deal is not "a deal."
It's not just the shale drillers who are in danger as they see their liquidity evaporate. As the WSJ writes today, and as covered here since January, it is the lenders themselves whose unfunded revolver exposure may suddenly become funded and expose them to even greater risks from the energy sector should oil not rebound far more forcefully and put US oil and gas companies back in the black. How big is the exposure? Very big: $147 billion.
Total chaos reigns as equity market "participants" flip from manic-sellers (IMF un-growth and Italian bank bailout failure) to panic-buyers after the following headline hits Bloomberg: SAUDI ARABIA, RUSSIA REACH CONSENSUS ON OIL FREEZE: INTERFAX
In the past few weeks, we have expressed our view why the much anticipated OPEC Doha meeting on "freezing" oil production will be one of the biggest "sell the news" events when it comes to oil. Yesterday, even Goldman opined why the OPEC Doha meeting will likely be a dud when Damien Courvalin said: "Don't Expect A Bullish Surprise." Now, we present the view of Bloomberg oil strategist Julian Lee, who says "Doha Freeze talks, if anything, look bearish for oil." Here's the simple reason why.
In recent days, we have observed a distinct trading pattern: a ramp early in the US morning, usually triggered by some aggressive momentum ignition, such as today's unexplained pump then dump in the EURUSD with stocks rising after the European open, rising throughout the US open, then peaking around the time the US closed at which point it is all downhill for the illiquid market. So far today, the pattern has held, and after trading flat for most of the overnight session, with Europe initially in the red perhaps on disappointment about the Italy bank bailout fund, a bout of early Europe-open associated buying pushed US futures up, following the first rebound in the USDJPY after 7 days of declines which also helped the Nikkei close 1.1% higher.