Oil Analyst Warns of Speculative Bubble

If the man who called the 2015 crude collapse is right, the oil market could be the next area to see a sharp pullback.

Oil, which is seeing its best start to a year since 2006, has entered a danger zone, according to Tom Kloza of the Oil Price Information Service.

Kloza, the firm’s global head of energy analysis, made the call on CNBC’s “Futures Now” on Tuesday just as Wall Street was coping with the stock market’s worst day since last August.

West Texas Intermediate graph

“There’s some collateral damage from the stock market right now. I don’t believe this is the bloodletting that’s due because of the tremendous speculative bubble and the money on the crude oil side,” Kloza said. “That will come at a later date.”

That day could be just weeks away, due to changing demand dynamics and “swelling” global markets, he added.

“All of the demand growth, all of it, is overseas. It’s not in the United States,” he said. “My sense is that global markets give back some of these very, very robust financial gains.”

Brent oil has soared 97 percent and WTI crude prices are up nearly 90 percent over the past two years. Right now, Brent is trading around $68 a barrel and WTI is bouncing around $64.

via CNBC

Oil Mixed After Surprise Drawdown in US Oil Inventories

Oil prices fell on Wednesday for a third day, after the U.S. Energy Department said oil inventories rose for the first time in nearly three months, though crude futures remained on track for the fifth straight month of gains.

U.S. oil inventories rose 6.8 million barrels in the week to Jan. 26, after 10 straight weeks of declines, which had dropped supply to its lowest levels since early 2015.

The increase far exceeded expectations for a rise of 126,000 barrels. Analysts noted that refiners have been cutting activity while U.S. crude production has kept rising.

Oil prices faded immediately after the news, then retraced some losses when the data showed a surprising 2 million-barrel drawdown in gasoline stocks, suggesting demand for products may be enough to limit seasonal inventory buildup.

West Texas Intermediate graph

U.S. crude futures were down 42 cents to $64.08 a barrel, a drop of 0.6 per cent as of 11:13 a.m. EST (1613 GMT), after hitting a low of $63.92 shortly after the release. Brent crude dropped 39 cents to $68.63 a barrel, a 0.6 per cent decline.

“Strong demand in the major refined products categories is supporting the entire petroleum complex after the data release,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

March U.S. gasoline futures dipped 0.1 per cent to $1.8828 a gallon.

“If this week’s drop is due to weather-related, unplanned incidents it may not yet herald the onset of turnaround season. However, those days are rapidly approaching,” Thompson said.

The U.S. Energy Information Administration said production rose to 9.92 million bpd, close to the country’s record output of 10.04 mln bpd set in 1970.

Production is expected to hit 11 million bpd by 2019. This week ExxonMobil said it is wants to triple its production in Texas’ Permian Basin to 600,000 bpd within seven years.

via Globe and Mail

ECB Coeure says Inflation will Reach CB Goal Very Gradually

Executive Board member Benoit Coeure said euro-area inflation will converge “only very gradually” toward the European Central Bank’s goal, justifying the need to continue providing stimulus.

Drawing a comparison with the U.S., where he noted that some fund managers anticipate an upside risk to price gains, the Executive Board member said “we see no such inflation tail risks at the current juncture.” He also said there is no concrete evidence that financial markets are starting to doubt the sustainability of the euro area’s economic expansion, and that investors aren’t questioning the ability of central banks to deliver on their inflation goals.

“An ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up,” Coeure, who heads the ECB’s market operations, said in a speech in Dublin. “We expect the ECB’s key interest rates to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.”

The comments came just before data showed inflation in the currency bloc slowed to 1.3 percent at the start of the year, down from 1.4 percent in December and well short of the medium-term goal of just under 2 percent.

via Bloomberg

Could WTI reach USD 70.00 per barrel ?

By Sara Israfilbayova

From a fundamental perspective, the continuous fall in the U.S. oil inventories is driving market given the positive global growth narrative, Stephen Innes, Head of FX Trading for OANDA told Azernews.

The expert said that oil markets were at the epicentre of volatility with WTI breaking the $ 66.00 per barrel market and marking the highest close since December 2014.

“It’s conceivable we could top $70 on WTI, but of course, Baker Hughes delivering a convincing signal that we should expect more U.S. rigs to come back online the closer we get to $70 per barrel after BH reported that 12 new wells came back online,” Innes stressed.

“But let’s not lose sight of the U.S. dollar follies, which are underpropping oil markets and providing the bounce to all commodity markets,” he stressed.

The expert went on to say that since we may only be in the early stages of the U.S. dollars demise, and when aggregated with the oil markets OPEC induced positive developments, the market could press significantly higher from increasing sensitivity and stronger correlations to the U.S. dollar alone.

“Structurally, the dollar can push much lower as signs are developing that we may be in the early stages of a multi-year secular bear market,” Innes mentioned.

Traders continue to look over their shoulder at the likelihood of U.S. oil production ramps and supporting that argument; Baker Hughes reported the number of active U.S. rigs rose by 12 to 759.

Further, the expert noted that last week was ended by singing a very familiar tune with U.S. equities putting in another strong performance, helped by more positive corporate earnings reports, while the USD weakened further, as the market was still digesting the aftershocks from the verbal ping-pong match when both Mnuchin and Trump dabbled into the FX debate.

“We should expect more two-way uncertainty entering the fray this week which could make for some touch and go moments, but for now, the markets remain comfortable to maintain a longer-term soft USD bias,” Innes added.

Meanwhile, as of January 31, Brent crude futures are down 0.69 cents, or about 1 percent, at $68.33 a barrel, while U.S. West Texas Intermediate (WTI) futures are down, 67 cents, or 1 percent, at $63.83



Fate of GBP Depends on Brexit Deal

Sterling had been on a downward trend since the U.K.’s vote to leave the European Union in 2016, but reduced concerns over an abrupt break-up with the EU are sending the currency higher.

The pound traded at $1.40 against the dollar Tuesday morning, not only boosted by a weaker dollar, but also because traders are more confident that the U.K. will strike a deal with the EU and thus avoid a so-called hard Brexit, where the U.K. and the EU would be trading under World Trade Organization (WTO) rules.

“(Prime Minister) Theresa May does not have the political capital or the unity within the government to implement a ‘hard Brexit,’” Stephen Gallo, head of European forex strategy at BMO Capital Markets told CNBC via email Tuesday.

“Other factors like the Irish border issue have also tied her hands in this regard. Conservative, pro-Brexit ministers and MPs are loathe to undermine Theresa May out of fears of toppling the government and paving the way for a snap election. For these reasons, we revised up our 12-month view in GBP-USD to $1.45 last October,” he said.

On June 23, 2016, the day the U.K. held a referendum on its EU membership, sterling was at $1.48. It tumbled on the following day to $1.36 and touched $1.20 in January 2017. According to Gallo’s predictions, if Brexit negotiations produce some sort of deal between the U.K. and the EU, sterling could be back to its pre-Brexit values by the end of the year.

via CNBC

US House Prices Rise in November

The supply crisis in the housing market is not letting up, and consequently neither are the gains in home values.

National home prices continued their run higher in November, rising 6.2 percent annually on S&P CoreLogic Case-Shiller’s most broad survey, up from 6.1 percent in October. Another S&P index of the nation’s 20 largest housing markets showed a 6.4 percent gain, higher than analysts had expected.

Prices nationally are now 6 percent higher than their 2006 peak, while those in the top 20 markets are still 1.1 percent lower.

“Home prices continue to rise three times faster than the rate of inflation,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Blitzer blames the continued lack of supply for the price gains, citing a very slow recovery in the home construction market. Home builders are ramping up production but are still not at even historically normal levels, never mind the huge pent-up demand in the market.

“Without more supply, home prices may continue to substantially outpace inflation,” added Blitzer

Local metropolitan markets seeing the highest gains are those that were rising fastest before the financial crisis. San Diego, Los Angeles, and Las Vegas continue to see strong gains. Seattle and San Francisco are seeing the highest gains of all, due to strong employment and very tight supply in both those markets.

via CNBC

US Consumer Confidence Rose in January

Consumer optimism pushed higher than anticipated in January, after a surprise decline the previous month.

The Conference Board’s measure of consumer confidence rose to 125.4 in January, higher than the 123.1 anticipated by economists polled by Reuters. The measure had declined to 122.1 in December.

The key index rose to 129.5 in November, the highest mark since the index hit 132.6 in November 2000.’

“Expectations improved, though consumers were somewhat ambivalent about their income prospects over the coming months, perhaps the result of some uncertainty regarding the impact of the tax plan,” Lynn Franco, Director of Economic Indicators at The Conference Board, said in a statement.

“Consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018,” Franco said.

via CNBC

Brexit is Already Impacting the UK Economy

What will Brexit mean for the British economy?
Executives, forecasters and bankers have been trying to answer that question for at least two years. The U.K. government has done its own analysis, and a leaked draft Tuesday makes for ugly reading.

BuzzFeed reported that the government analysis suggests Brexit will reduce economic growth by between 2% and 8% over 15 years.

“This was initial work, not approved by ministers, which only considers off-the-shelf scenarios. No analysis was made of the bespoke [trade] arrangement we seek as a matter of government policy,” a spokesman for Prime Minister Theresa May told reporters.

But never mind the future, there’s already plenty of evidence that the June 2016 vote by Britain to leave the European Union — by far its biggest export market — is already causing damage. And that’s with at least a year of fraught negotiations on the uncertain relationship between the U.K. and EU still to come.

via CNN