Sunday’s producer meeting is all about nothing no matter what agreement might be forged. At best, the agreement will be, as Russia’s energy minister has stated, a gentlemen’s affair, with no binding commitments, no concrete next steps beyond having a review meeting, and no procedure for moving to production cuts.
Good news is still bad news after all. After last night's China 6.7% GDP print which while the lowest since Q1 2009, was in line with expectations, coupled with beats in IP, Fixed Asset Investment and Retail Sales (on the back of $1 trillion in total financing in Q1) the sentiment this morning is that China has turned the corner (if only for the time being). And that's the problem, because while China was a good excuse for the Fed to interrupt its rate hike cycle as the biggest "global" threat, that is no longer the case if China has indeed resumed growing. As such Yellen no longer has a ready excuse to delay. This is precisely why futures are lower as of this moment, because suddenly the "scapegoat" narrative has evaporated.
Recall all those tankers we have profiled before on anchor next to the Iran shore? They have finally started to move.
Forget Doha, says the International Energy Agency (IEA), bet it all on US production crashing.
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.
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
Egyptians Outraged At Government Plan To Hand Over Islands To Saudi Arabia As Saudi King Arrives In TurkeySubmitted by Tyler Durden on 04/12/2016 11:27 -0400
the Egyptian government said on Saturday that the two countries had signed maritime demarcation accords that put the islands of Tiran and Sanafir in Saudi waters in the process handing over the two islands to the Saudi kingdom. As Reuters reported, "Egypt's announcement during a five-day visit by King Salman that it would transfer two Red Sea islands to its Saudi ally has outraged Egyptians, who took to social media to criticize the move"
- Gloomy start to results season hits shares (Reuters)
- Stocks Rise Around World as Commodities Advance; Bonds, Yen Drop (BBG)
- Oil hits 2016 high above $43 on producer meeting hopes (Reuters)
- Rosneft chief Igor Sechin says low oil prices will not last (FT)
- Banks Face Massive New Headache on Oil Loans (WSJ)
- Wells Fargo Misjudged the Risks of Energy Financing (BBG)
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.
When the going gets tough for politicians, the politicians do what they do best: Declare success smack in the face of a resounding defeat.
“Oil producers don’t want to cut their output. We have already asked for the decrease of production, but some countries have refused, including non-OPEC members, especially Russia,” Khebri says, according to APS
As Iranian media reported overnight, Russia has delivered the first part of an advanced missile defense system to Iran, starting to equip Tehran with technology that was blocked before it signed a deal with world powers on its nuclear program.
"We do not expect the meeting to deliver a bullish surprise as we believe production cuts make little sense given it has taken 18 months for the rebalancing to finally start. In addition, any resolute agreement that would support prices from current levels would prove self-defeating, in our view, as we believe that sustained low prices are required for the nascent non-OPEC supply adjustments to deliver a deficit in 2H16. Finally, a production freeze at recent production levels would not accelerate the rebalancing of the oil market as OPEC (ex. Iran) and Russia production levels have this year remained close to our 2016 average annual forecast of 40.5 mb/d." - Goldman
According to the state-run Oil Marketing Co., Iraq increased crude output to a record level in March, ahead of the long-awaited April 17 meeting in Qatar where OPEC members and other producers may or may not (they won't) agree to cap production to curb a global glut. Crude output in OPEC’s second-biggest producer rose to 4.55 million barrels a day last month from 4.46 million barrels in February, while exports increased to 3.81 million barrels a day in March from 3.23 million the previous month.