International Energy Agency
WTI keeps dead-cat-bouncing thanks to the algos and crashing thanks to reality. This morning's reality check on the overnight ramp comes courtesy of a double-whammy from Goldman ("wouldn't be surprised to see WTI in the teens") and The IEA which increased its estimate of excess-supply drastically. This has dragged WTI back below $30 once again and where oil goes, stocks go...
- Oil slump rocks markets again in equity rout (Reuters)
- Global Stocks on Brink of Bear Market as Oil Slides; Ruble Drops (BBG)
- Global Stocks Slide on Oil Rout (WSJ)
- Emerging Markets Roiled as Stock Selloff Surpasses Asian Crisis (BBG)
- Rising Debt in Emerging Markets Poses Global Threat (WSJ)
- China shares slip as oil slides, outweighing stimulus hopes (Reuters)
Last night's Chinese data deluge can only be classified with one word: bad. So if bad news was again bad news as many claim, both commodities (read oil), and US equity futures should be tumbling right now... but just the opposite is happening and in fact both Brent and WTI have already jumped over $30 this morning. This happens even as the IEA said this morning that global oil markets could “drown in oversupply,” And yet this morning both commodities, global stocks and futures soaring? Simple: the following Bloomberg headline summarizes it: "Brent Rallies More Than $1 as China GDP Spurs Stimulus Bets," and where Brent goes, so goes risk, and the S&P.
Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer. Congress’ decision to lift the 40-year U.S. ban on crude oil exports reflects the same misinformed and distorted thinking that declares that the world’s highest cost producer - tight oil - can somehow also be the world’s swing producer.
The 'death cross' of these two energy market indicators is all one needs to know about the oil market...
“In our estimates, one should hardly expect any serious growth of the oil price above $50," Oreshkin told a breakfast forum hosted by Russian newspaper Vedomosti on Friday. “The oil industry is changing structurally and it may happen that... the global economy will not need that much oil."
'As goes oil, so goes the US equity market' appears to bethe new mantra. Just as yesterday's pump-and-dump tracked oil, so in the pre-market, WTI Crude plunged back to fresh 7-year lows after IEA warned that the oil glut will worsen, with prices lower for longer as demand remains subdued through at least 2017. This in turn sent US equities tumbling with Dow futures down 200 points (down 330 from Thursday highs).
It was a relatively calm overnight session in which European stocks wobbled modestly, Japan was up, China was down following its weakest fixing since 2011 as the PBOC continues to aggressively devalue since the SDR inclusion (stoking concerns capital outflows are once again surging), EM stocks stocks were weak and the dollar was unchanged ahead of today's retail sales data and next week's Fed meeting, and then suddenly everything snapped.
The latest confirmation that the oil cartel formerly known as OPEC is effectively non-existent, came a little over an hour ago when in its latest November monthly report, the Organization of Petroleum Exporting Countries reported that total monthly crude output for the member nations rose to 31.695 million barrels per day, the highest amount produced in three and a half years.
Over the weekend, in its latest quarterly presentation, the Bank of International Settlements made what may have been a very premature assessment that China is now contained. Judging by events in the past 24 hours, the reality is anything but.
While talk of record backlogs of supertankers and an unprecented 3 billion barrels of crude oil stock-piles sound impressive - and are weighing on crude prices - the following stunning image provides some context for just what this means...
- Belgian Police 'Arrest' Public Enemy No.1 (Sky News)
- France Widens Crackdown at Home as Bombs Rain on Islamic State (BBG)
- Putin Goes From G-20 Pariah to Player at Obama Turkey Talk (BBG)
- Paris Attacks: 150 Raids as France Goes to 'War With Terrorism' (NBC)
- 'Rocket Launcher Found' In French Police Raids (Sky)
- Geopolitical worries lift oil after Paris attacks, but glut weighs (Reuters)
- Japan's economy falls back into recession again (BBC)
In true stop-running algo common sense, WTI crude jumped overnight, back above $42 briefly. However, a double whammy of warnings from IEA (of a "massive cushion" of 3 billion barrels worldwide) and the highest volume of supertankers for this time of year since 2013 has sent crude sliding back below $42.
- Bonds Rise as China Drags Down Metals, Selloff in Stocks Resumes (BBG)
- European Stock Rally Runs Out of Steam Amid China Growth Concern (BBG)
- Obama's immigration action blocked again; Supreme Court only option left (Reuters)
- Ukraine: Cyberwar’s Hottest Front (WSJ)
- With $170.4 Million Sale at Auction, Modigliani Work Joins Rarefied Nine-Figure Club (NYT)
- IEA Sees OPEC Market Share Growth in 2020 as Rivals Stagnate (BBG)