Busy Day ahead with CPI and Real Earnings at 7:30 A.M. Central, EIA Energy Stocks at 9:30 A.M., Janet Yellen last Fed Meeting with decision of raising Interest Rates and how much? We also have Dairy Product Sales at 2:00 P.M. Reuters News reported yesterday that the White House will host talks between the rival Oil and Ethanol industries today in hopes of brokering a deal to help refiners struggling to meet the country’s biofuel policy. One source familiar with the matter said the meeting would likely focus on short-term fixes to help oil refiners on the U.S. East Coast who say they are struggling with the cost of meeting the Renewable Fuel Standard (RFS) requirements. The industry has requested tweaks to the policy in the past that would cut the annual targets for biofuels; allow Ethanol exports to be counted against those targets, or a shift in blending burden to supply terminals from the refineries. But the Trump administration has ruled in favor of Big Corn and against the refining industry in a series of decisions this year. On the Grain front all December contracts go off the board tomorrow so it would behoove traders with a position to roll or liquidate before the last minute to avoid any type of a squeeze play.
On the Corn front the March contract is currently trading at 348 ½ which is ¾ of a cent higher. The trading range has been 349 ¼ to 347 ¾. Yesterday’s report showed less Corn that was previously thought or reported, however, it should not be enough to start a shock rally. Before you know it we will be talking about plantings and not just weather in South America.
On the Ethanol front there were no trades posted in the overnight electronic session. The January contract settled at 1.295 and is currently showing 2 bids @ 1.293 and 2 offers @ 1.301 with Open Interest at 1,415 contracts.
On the Crude Oil front last night’s API data showed draws in Crude Oil of 7.382 million barrels, Builds in Gasoline stocks of 2.334 million barrels, Distillates had builds of 1.538 million barrels while Cushing, Oklahoma showed draws of 2.704 million barrels. Investors are still hard pressed to believe the past two weeks reports and maybe these numbers are more in line. However it is time to roll up your sleeves because with Roy Moore losing last night’s election, they will try and get it done before year end. Also, the effect on the U.S. dollar and Stock Market after today’s Fed decision. In the overnight electronic session the January Crude Oil is currently trading at 5754 which is 45 points higher. The trading range has been 5772 to 5740.
On the Natural Gas front supplies are overwhelming the cold weather bullish news with producers running out of storage. The January contract is currently trading at 2.723 which is 4 ½ cents higher. The trading range has been 2.730 to 2.684.
— Daniel Flynn
The Energy Report: It’s beginning to look a lot like rate hikes
Its beginning to look a lot like rate hikes, everywhere you go!
Look at the five and ten’s, yields rising once again as Fannie Mae and banks arrange more loans.
It’s beginning to look a lot like Fed Day! Traders on the floor. And they all pretty much agree that it will be higher rates that we will see, and we will see more.
Wages and growth and economic green shoots was the wish of Janet and Ben. Now it is Powell that will do the walk and the talk and raise the rates again, and Donald Trump wants to make America great again. It beginning to look like rates hike, stocks are off the chart. And the thing that is making them swing is that Tax cuts that will be as the economy jump starts.
This is Janet Yellen’s swan song and in a way an interest rate increase for her is considered a victory. The dovish Fed Chair finished the job that Ben Bernanke started and despite a lot of criticism seemed to hold her own in a crazy political world. President Donald Trump was backed into a corner to replace after heavily criticizing her during the campaign but replaced her with William Powell that always voted Janet’s party line. Yet doves or hawks, Powell should have an easier time at the Fed because he does have prescient that gets how the economy works.
You can’t live on monetary policy and government regulation alone. You need smart fiscal policy. You need to reward small business not penalize them. You need real tax reform. You need for the Government in many ways out of the way. That’s why Ben Bernanke and Janet Yellen deserve some credit! Because they had to do all the heavy lifting n the economy without any help from that last administration and the fiscal side. Good Luck Janet, I think you are leaving with the economy on solid footing.
Still the real test will be in a few years after we see what type of asset bubbles may have been created by her dovish policies. Stocks are soaring but in a way, they are really catching up with the underperformance we had from one of the weakest recoveries from an economic downturn in history.
The Feds dot plot may add to the volatility that we have seen in the oil market. Dated Brent Crude prices pulled back after soaring on the ongoing shutdown of Forties pipeline that has shut in at least 40% of North sea production, moves 450,000 barrels per day (bpd) and is the largest out of the five crude oil streams that makes up the Brent contract. Royal Dutch Shell and BP have closed down oil fields in response. The shut in is going to continue to support prices and the selloff after the spike was really profit taking and offsets of spreads.
Oil also accelerated its sell off before regaining ground on a report from the U.S. Energy Information Administration that said that U.S. crude oil hit a record high 10.02 million barrels of oil a day in 2018! Wait! Where have I heard that before! Over 10 million barrels? Oh yeah! I remember! That was from the EIA last year when we said we would be well over 10 million barrels a day! That did not happen. The reason it did not happen is because they are over estimating shale output and their models are wrong. They need to change the model to include actual data from shale producers and not just assume that every shale well is the same. Unless they correct this the increase in oil production projects should be lowered by a factor of 5 to 10% .
Opec says they see evidence of the tightening of supply and we are seeing in our oil inventories! Another massive 7.4 million barrels oil supply drop, reported by the American Petroleum Institute last week. That brought oil back up. They also reported that gasoline stocks rose by 2.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.5 million-barrel gain. Distillate fuels stockpiles, which include diesel and heating oil, rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain. The U.S. government’s Energy Information Administration releases its weekly oil report today.
Bloomberg reports that OPEC is near its goal of rebalancing the oil market as an inventory overhang targeted by its output curbs continues to shrink, according to the group’s secretary general. The stockpile glut — including crude as well as oil products — has shrunk to 130 million barrels above the five-year average, Mohammad Barkindo said in Beijing before the release of OPEC’s monthly market report on Wednesday. The group last month estimated the overhang at about 154 million barrels. Say goodbye glut Hello tight market!
Reuters reports The World Bank will no longer finance upstream oil and gas projects after 2019, apart from certain gas projects in the poorest countries in exceptional circumstances, it said on Tuesday, drawing praise from environmental groups.
Nat gas crashed! It’s not cold enough to overcome record production. Still we are due for an oversold bounce.
— Phil Flynn
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