Commodities vs. Technology in Trading

Guest post from Paul Somerfield:
In commodity trading, it’s important to take two kinds of technology into account. The first is technology that can affect the underlying price of the commodity and the second is disruptive digital technology that can change the way commodities are traded.
Technology can be a game changer for commodity prices Take oil. A decade ago we were all being told that we’d reached peak oil, and that declining stocks would mean an astronomically high oil price in the future.
Yet, at the time of writing, Brent crude is trading at $61.33 a barrel, way below its peak price. So what happened? Technology happened, that’s what. Advances in exploration and drilling technology meant that oil previously locked up in shale could be mined. An enormous amount of new inventory was able to exploited. So much for peak oil and a crude price nudging $200. Right now, the OPEC producers are trying to get the price so low that the US shale industry calls it a day because it’s not worth the expense of fracking and horizontal drilling to extract the oil.

This post was published at Deviant Investor on November 4, 2017.

Saudi Rhetoric Sends Oil Prices To Two-Year High

Comments made by Saudi Arabia’s Crown Prince Mohammed bin Salman (MBS), sent Brent crude to its highest in more than two years (highest since July 2015), above $60 a barrel, Reuters reports. West Texas Intermediate was more impervious to the comments, but it also gained a few cents, to the highest in six months.
‘The Saudis keep pressing for an extension of the output-cut deal through next year, so the market is feeding off that and we are seeing signs of tightening out there as a result of the program,’ John Kilduff, a partner at Again Capital, told Bloomberg. At the same time ‘the Iraq-Kurd situation is also getting the attention of the market. The volumes are down out of Ceyhan’

This post was published at Zero Hedge on Oct 27, 2017.

WTI Surges Towards $50 – Breaks Above Key Technical Level

Ahead of today’s rig count data, WTI (and Brent) Crude is extending its short-squeeze gains after the bullish inventory data trend was confirmed (shrugging off the surge in production). Signals from an increaisng number of firms that they are cutting capex (and this drilling) has helped send WTI and Brent back above their 200-day moving-averages.
Halliburton, promising to be disciplined in adding more fracking gear to the oilfields, says U. S. explorers are “tapping the brakes” on drilling as the price of oil struggles to breach $50 a barrel.

This post was published at Zero Hedge on Jul 28, 2017.

Gold Price Slips vs. Falling Dollar as Oil Bounces, Bank of England Split Boosts ‘Brexit-Hit’ Pound

Gold prices held near 5-week lows against a falling US Dollar on Wednesday, trading at $1243 per ounce as commodities rallied but world stock markets extended Tuesday’s retreat in New York.
As Brent crude oil rallied $1 per barrel from yesterday’s 7-month lows near $45, that pulled the EuroStoxx 50 index of major European shares more than 1% lower.
The British Pound meantime rallied after a split emerged amongst senior Bank of England policymakers over holding or raising UK interest rates from the current all-time record low of 0.25% with 435 billion ($550bn) of quantitative easing bond purchases.
Check out Global Liquidity Reaching a Tipping Point
The Euro currency also rallied against the Dollar but held 1 cent below last week’s peak, the highest level since Donald Trump won the US presidential election last November.
The gold price for Eurozone investors fell below 1115 per ounce, near its lowest level since January.

This post was published at FinancialSense on 06/21/2017.

Stock Prices Fall as Senate Passes Russia Sanctions Bill

In Dow Jones news today, stock prices fell as the Senate passed a bill that would place new sanctions on Russia.
Here are the numbers from Thursday for the Dow, S&P 500, and Nasdaq:
Now here’s a closer look at today’s most important market events and stocks, plus Friday’s economic calendar.
The Five Top Stock Market Stories for Thursday
European finance ministers debated another round of debt relief for the embattled Greek economy and decided to offer a bailout of 8.5 billion euros ($9.5 billion). Greece’s current bailout program is the third effort by international finance leaders since the nation fell into economic calamity in 2010. Crude oil prices cratered and hit a seven-month low on news of a huge spike in U. S. gasoline inventory levels and expectations that OPEC will not be able to balance supply and demand. Crude oil prices are now off more than 12% since May 25. The WTI crude oil price today fell 0.7%. Brent crude dipped 0.2%.

This post was published at Wall Street Examiner on June 15, 2017.

US Oil Production Makes Waves

There’s no end in sight to slumping oil prices – good news for consumers but a dire development for major oil producers like Saudi Arabia and Russia. And now, rising US oil production and exports are contributing to the slump.
Last week, oil prices reached new lows for 2017, with Brent crude dipping below $48 per barrel and West Texas Intermediate dipping below $46. The drop has been attributed to an unexpected increase in US crude inventories, which rose by 3.3 million barrels last week (according to the US Energy Information Administration), despite expectations that it would drop by 3.5 million barrels.
The rise in production is compounded by rising US oil exports, since the US lifted a 40-year ban on these exports in 2015. This led to modest increases in oil exports in 2016 but substantial increases so far in 2017. This is a key reason prices will remain low in the long term.
Ebbs and Flows in US Exports
It is worth remembering why the United States banned oil exports in 1975 (exceptions were allowed at the discretion of the president). 1970 set a record for the highest crude oil production in the US, though this record will likely be broken in the next two years. The US was producing a lot, but it was also consuming a lot, forcing it to import more from OPEC states, which produced about 55% of the world’s oil in 1973.

This post was published at Mauldin Economics on JUNE 12, 2017.

Silver Stockpiles Hit 21-Year High

Silver prices rallied with gold and both metals recovered last week’s closing level in US Dollar terms in London trade on Friday.
Silver prices rose above $16.40 per ounce as government bonds rose with world stock markets and commodities ahead of key US data on retail sales and consumer-price inflation.
Separate data overnight said China’s banks extended more new lending than forecast in April, but were likely overtaken by so-called ‘shadow banking’ loans now facing a crackdown by the Communist authorities.
Silver prices gained almost 1.9% by Friday lunchtime from Tuesday’s 5-month low, rallying faster against other currencies as the US Dollar also gained on the FX market.
“Silver resisted a further test lower in New York on Wednesday,” says a trading note from Swiss refiners MKS Pamp, “with the recent sell-off now looking overdone and interest, albeit likely timid interest, creeping back into the market.”
Gold prices today extended their rally to 1.1% from Tuesday’s 3-month low at $1214 per ounce as Brent crude oil edged further above $50 per barrel.

This post was published at FinancialSense on 05/12/2017.

Brent Crude Drops Below $50 After Russian Comments, Sliding Demand Forecast

For the first time since mid-March, Brent Crude prices tumbled below $50 after Russia said no decision had been made yet on extending the oil output cut production deal. This came after the 11th weekly rise in US crude production and concerns from JBC that oil demand is declining rapidly.
Russia Says No Decision Yet on Extending Oil Output Cut W/ OPEC – Russia will make announcement if decision is taken, Kremlin spokesman Dmitry Peskov tells reporters on conference call.
US Crude production rose once again to August 2015 highs…
And demand forecasts are tumbling:

This post was published at Zero Hedge on May 4, 2017.

Gold, Silver and Oil Spike After U.S. Bombs Syria

– Gold silver oil spike after U. S. bombs Syria
– Gold and silver spike 1% as oil rises 1.4%
– Gold breaks 200 day moving average, 4th week of gains
– Stocks fall after U. S. strikes in Syria rattle markets
– U. S. missiles hit airbase; Lavrov says no Russian casualties; Russia deploys cruise missile frigate to Syria
– Russia denounces ‘aggression’ & warns of ‘considerable damage’ U. S. ties
– ‘Aggression against a sovereign state in violation of international law’ – Russia
– Iran warns ‘destructive and dangerous’ strike
– China warns against ‘further deterioration’ in Syria
– Trump sending message to China and Russia
– Concerns of wider war see World War III trend on Twitter
– Brexit and French elections sees robust demand for gold and silver bullion
Gold and silver prices spiked sharply higher today, as investors piled into the safe haven asset in the wake of U. S. bombing of Syria.
Gold and silver bullion rose more than 1% and oil prices rose 1.4% after the bombings.
Gold reached a 5-month high as risk aversion returned to markets leading to a sell off in stocks and oil prices rising. Brent crude futures surged more than 2% after the US attack and were last up 1.5% at $55.72 a barrel.

This post was published at Gold Core on April 7, 2017.

Will The Oil Price Slide Lead To A Credit Crunch For U.S. Drillers?

The recent drop in oil prices, which has almost wiped out the price gains since OPEC announced its supply-cut deal, is coming just ahead of the spring season when banks are reassessing the credit lines they are extending to support drillers’ growth plans.
WTI front-month futures have been trading below $50 a barrel for a couple of weeks, while Brent crude slipped briefly below $50 on March 22, dropping below that psychological threshold for the first time since November 30, the day on which OPEC said it agreed to curtail collective oil production in an effort to rebalance the market and lift prices.
Lenders review the oil and gas companies’ creditworthiness twice a year, in April and in October, in the so-called borrowing base redetermination. The recent drop in the price of oil may prompt banks to be more cautious in their assessments, but still, things look brighter for oil firms than they did in March last year when oil prices were consistently below $40 a barrel.

This post was published at Zero Hedge on Mar 29, 2017.

Bankrupting OPEC.. One Million Barrels Of Oil At A Time

The world hasn’t really caught on yet, but OPEC is in serious trouble. Last year, OPEC’s net oil export revenues collapsed. How bad? Well, how about 65% since the oil price peaked in 2012. To offset falling oil prices and revenues, OPEC nations have resorted to liquidating some of their foreign exchange reserves.
The largest OPEC oil producer and exporter, Saudi Arabia, has seen its Foreign Currency reserves plummet over the past two years… and the liquidation continues. For example, Saudi Arabia’s foreign exchange reserves declined another $2 billion in December 2016(source: Trading Economics).
Now, why would Saudi Arabia need to liquidate another $2 billion of its foreign exchange reserves after the price of a barrel of Brent crude jumped to $53.3 in December, up from $44.7 in November?? That was a 13% surge in the price of Brent crude in one month. Which means, even at $53 a barrel, Saudi Arabia is still hemorrhaging.

This post was published at SRSrocco Report on February 25, 2017.

Shrinking Oil Giant Pemex Starts 2017 on Wrong Foot

Mexico’s ATM is stewing in a toxic mix.
Despite the partial recovery of oil prices, 2016 was not a kind year to Mexico’s fast-shrinking state-owned (but soon to be privatized) oil giant, Pemex. For over 70 years the company served as a huge funding asset, at times providing as much as one-third of total government revenues. But in 2016 it became a national liability, requiring a 4.2 billion bailout from the government. It’s unlikely to be the last.
During the first 11 months of 2016, the company registered average production of 2.16 million barrels per day, its lowest in more than three decades. Pemex forecasts that production will fall to around 1.94 million barrels a day by 2017, marking the first time that the figure has fallen below the 2 million barrel point since 1980. Given the gathering deterioration in the company’s accounts – including a total debt overhang of around 100 billion – daily production could fall by as much as 1.6 million per day by 2020, Morgan Stanley warns.
As goeth Pemex’s production, so goeth Mexico’s oil revenues, which have shrunk from 6% of GDP three years ago to 2.5% today. The export figures are just as ugly. In 2011, when the price of Brent crude averaged over $100 a barrel, Pemex’s export revenues hit a historic peak of $49 billion, a monthly average of $4.11 billion. In the first quarter of 2016 the monthly average was just $893 million. That’s a plunge of 78%.

This post was published at Wolf Street on Jan 2, 2017.

Oil Extends Losses To 1-Month Lows ($47 Handle) Amid OPEC/NOPEC Disagreement

WTI Crude has extended losses this morning below $48.00 – a one month low – as more details emerge from the “just conversations” had in Vienna this weekend that tend to indicate no agreement on even a freeze, yet alone cut, in global crude production.
Brent crude is also back below $49 (for Dec) and $50 (for Jan).
Bloomberg summarizes the latest publicly stated positions of key countries involved in talks that may result in a freeze or reduction in oil supply.
Consistent with its view that secondary-source production est. are inaccurate, Iraq’s state marketing agency on Sunday released detailed production data on 26 fields, plus a single output figure for semi-autonomous Kurdish region

This post was published at Zero Hedge on Oct 31, 2016.

Pemex Collapse Threatens Biggest Banks in Mexico

Big-oil bailout already under way. These days, the trend is not Pemex’s friend. Mexico’s loss-leading, debt-swamped, state-owned oil giant company announced that in July it had imported 554,000 barrels of oil a day – its highest monthly volume of imports since public records began in 1990.
In total, two-thirds of all the oil Mexico consumed in July was imported – a staggering statistic for a country that until not so long ago was home to one of the largest oil fields in the world, the Cantarell. Pemex also acknowledged that its crude production fell a further 5% in July while its natural gas production shrunk 9%.
The export figures were just as ugly. In 2011, when the price of Brent crude averaged over $100, Pemex’s export revenues hit a historic peak of $49 billion, a monthly average of $4.11 billion. In the first quarter of 2016 the monthly average was just $893 million. That’s a plunge of 78%.

This post was published at Wolf Street on August 26, 2016.

Why An OPEC Production Cap Is Unlikely

Global oil markets have become volatile once more as the Organization of Petroleum Exporting Countries (OPEC) announced on August 8 that they will hold informal talks during the September meeting of the International Energy Forum in Algeria.
Initial speculation centered on recent moves by cartel members including Kuwait, Venezuela, and Ecuador to re-impose caps on output to force a rise in prices. Acting on this suspicion, Brent crude prices spiked to over $45 per barrel before beginning to settle back.
This initial reaction to the announcement of the September OPEC meeting is premature, however. There are several reasons why it is unlikely any action will be taken by OPEC at the meeting to restrain output. Nevertheless, continued speculation prior to the meeting in late September will likely hold oil prices above $40 per barrel for now.
1. U. S. production higher than expected
On Wednesday, the U. S. Energy Information Administration (EIA) reported that U. S. production will fall from 9.3 million barrels per day in 2015 to 8.73 million barrels per day in 2016. This production estimate, though, was revised upward from their original forecast of 8.61 million barrels per day for 2016.

This post was published at Zero Hedge on Aug 17, 2016.

WTI Crude Tops $50 For First Time Since October Amid Supply Disruptions

WTI and Brent Crude oil prices have both broken above $50 for the first time since October 2015 this morning – almost doubling off its Feb 11th 26.05 lows. The immediate catalyst appears to be a combination of inventory drawdowns in US crude, continud US production cuts, and further supply disruptions (Nigeria specifically), none of which scream demand or growth is going to make a dent in the glut.
July WTI tops $50…
‘The immediate driver is a good draw on U. S. crude stockpiles, helping to nudge the price up a bit further,’ says Ric Spooner, chief analyst at CMC Markets in Sydney. ‘The market hasn’t had any bad news to knock it off its perch but the price is likely to struggle if it gets into the $50s. There is still quite a bit of inventory around’

This post was published at Zero Hedge on 05/26/2016.

Is Glencore Manipulating The Price Of Oil: Swiss Trader Holds Over 30% Of June Brent Supply

While oil bulls were delighted by yesterday’s DOE news of an inventory drawdown refuting the prior day’s API news of a major build, what was ignored was the build in Cushing storage (more on that shortly), which according to Genscape hit a utilization just shy of 80%, or more than 70 million barrels, a record high since Genscape began monitoring the hub in 2009. To be sure, the risk of running out of land storage has been one we have previously discussed on various occasions and hinted that one way this is being circumvented is with substantial amounts of oil being stored on tankers at sea, mostly by commodity trading companies who take advantage of the oil contango to generate month to month profits as producers choose to keep their product away from the market until prices rise.
As it turns out, not only is this the case, but according to Reuters, one particular energy trader – a name well-known to Zero Hedge readers – Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.
As Reuters details, citing trade sources, Glencore has built up one of the largest positions in part of the Brent crude market which acts as a benchmark for global oil prices since the start of the year.

This post was published at Zero Hedge on 05/12/2016.

Why These Oil Price Predictions from Wall Street Are Dead Wrong

Although prices are up 75.6% from their 13-year low of $26.21 in February, oil price predictions on Wall Street are still bearish.
In fact, one investment bank sees crude oil prices tumbling below the $30 mark by the fourth quarter. That’s a more than 35% drop from yesterday’s close of $46.03.
This chart shows where four of the largest banks on Wall Street see West Texas Intermediate (WTI) crude oil prices headed over the next few quarters…

According to a Wall Street Journal survey of 13 investment banks, the average Brent crude oil price prediction is $41 a barrel by the end of 2016. The average prediction for WTI is even lower at $39 a barrel.

This post was published at Wall Street Examiner on April 29, 2016.

A New Crisis Kicks off in Mexico

Pemex, Mexico’s over-indebted, money-losing state-owned oil giant, appears to be in a state of terminal decline. To survive, it needs some last-minute reprieve or miracle. Instead, what Pemex gets are tragic industrial accidents – the body count of the last accident alone was 32 – hemorrhaging losses, and an ever worsening balance sheet.
The latest point of consternation is the catastrophic performance of the company’s exports. Even by recent standards, the numbers make for dismal reading. In the first quarter of 2016, Mexico’s oil exports totaled $2.67 billion, compared to $5 billion in the same period last year – almost a 45% drop! It’s the company’s worst export performance since the first quarter of 2002.
This is a function of the oil price plunge and the deteriorating oil production in Mexico. At this rate, Pemex won’t have an export market left to speak of, especially with U. S. demand for Mexican oil slipping 18% in January and February alone.
If you step back a little further in time, you get an even starker picture of the sheer scale of the carnage. In 2011, when the price of Brent crude averaged over $100, Pemex’s export revenues hit a historic peak of $49 billion, working out at a monthly average of $4.11 billion. In the first quarter of 2016 the monthly average was just $893 million. That’s a plunge of 78.2%.

This post was published at Wolf Street by Don Quijones ‘ April 28, 2016.

Doha Meeting Reveals Opec’s Inability to Control Global Oil Prices

The recent Doha meeting of major oil producers failed to agree on oil output freeze deal and confirmed the existence of deep disagreements within Opec.
The oil prices agony continues as major oil producers failed to reach an agreement on production freeze at the long-expected meeting in Doha on April 17.
Must read Don Coxe: Low Oil Prices Will Persist As Long As the Saudis Are Frightened of Iran
The expectations surrounding the meeting had fueled hopes that the 20-month long slump in oil prices might finally be over and led to a partial recovery in oil prices. But it now seems that the period of low prices is not over yet.
Brent crude fell more than 5% on 18 April, to $41 per barrel, and WTI crude by 7%, to $38 per barrel.
Brent Crude (Price per barrel)

This post was published at FinancialSense on 04/20/2016.