Monday, March 14, 2016

Markets crawl higher while oil falls on negative OPEC report

Dow gained 15 from buying in the PM, decliners slightly ahead of advancers & NAZ added 1.  The MLP index was fractionally lower to the 261s & the REIT index lost a fraction to the 327s.  Junk bond funds slid lower & Treasuries found buyers.  Oil dropped & gold was off the highs (more on both below).

Dow Jones Industrials

3 Stocks You Should Own Right Now - Click Here!

CLJ16.NYM....Crude Oil Apr 16....37.21 TDown ...1.29  (3.4%)

Live 24 hours gold chart [Kitco Inc.]

OPEC predicted global demand for its crude oil will be less than previously thought in 2016 as supply from rivals proves more resilient to low prices, increasing the excess supply on the market this year.  The report from the Organization of the Petroleum Exporting Countries contrasts with that of the International Energy Agency which on Fri said producers outside OPEC were cutting production by more than it had expected.  Saudi Arabia in 2014 led a change in OPEC strategy to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as US shale oil.  The move accelerated a collapse in prices, which hit a 12-year low of $27 in Jan.  The price drop has started to slow the development of relatively expensive supply sources such as shale & forced companies to delay or cancel $B worth of projects, putting some future supplies at risk.  OPEC still expected supply from outside the group to fall 700,K bpd this year.  But it revised up the absolute level of non-OPEC supply in 2015 & 2016, & said producer efforts to maintain output made its 2016 forecast more uncertain.  "There has been a reduction in production costs, mainly in the U.S., as well as increased hedging, with producers choosing to produce with losses rather than stopping production," OPEC said.  "This has caused the non-OPEC supply forecast in 2016 to become more uncertain."  As a result, OPEC now expects the global demand for its crude to average 31.52M bpd in 2016, down 90K bpd from last month's forecast.  The group pumped 32.28M bpd in Feb, down about 175K bpd from Jan, mainly due to outages in Iraq & Nigeria.  Iran, which wants to regain market share after the lifting of Western sanctions rather than freeze output, told OPEC it raised supply to 3.39M bpd, about 250K bpd more than the secondary sources' estimate.

OPEC Sees Lower 2016 Demand for its Oil

Global oil prices fell as much as 4% on concerns a 6-week market recovery has gone beyond fundamentals, as US crude stockpiles continue to mount & Iran maintains little interest in a global production freeze.  A market intelligence firm reported an inventory build of 585K barrels in Cushing, Oklahoma, taking the delivery hub for US crude futures closer to capacity.  Russia said OPEC's meeting on a production freeze with other key oil producers like itself will probably be held in Doha in next month.  It also said Iran supports the plan, although Tehran was keen to restore its crude exports first to pre-sanction levels.  There is a prediction for a $25-$45 trading range for US crude in an oversupplied but volatile market.

Oil Tumbles as Stockpile Worry Overshadows Rally

Gold rose as the previous session's near 2% loss tempted some price-sensitive buyers back to the market, but moves were muted ahead of closely watched policy meetings of the US & Japanese central banks this week.  The metal bounced to a 13-month high on Fri after the ECB signalled an end to rate cuts, pushing the € sharply higher.  It later fell back to post its biggest one-day loss in nearly a month, but has since rebounded as uncertainty ahead of this week's central bank meetings sharpened appetite for the metal as a haven from risk.  Gold is trading about $1258.  The Federal Reserve 2-day policy meeting, starting tomorrow, will be watched for clues on the future pace of US rate increases.  A rate hikes could lift the opportunity cost of holding non-yielding bullion, while boosting the $, in which it is priced.  The metal has risen 18% this year as expectations for further near-term hikes faded.  Investors are also keeping a watch on the Bank of Japan meeting where it is set to discuss this week whether to exempt $90B in short-term funds from its newly imposed negative interest rate.  Hedge funds & money managers increased their bullish position in COMEX gold to the highest in 13 months in the latest week.

Gold recovers poise ahead of Fed meeting

The stock market was not sure what to do, so a few buyers returned in late day trading.  Oil has lost its short term allure & thoughts about the FOMC meeting haunt the market.  Chances are tomorrow will be another lackluster day with little decided.

Dow Jones Industrials


No comments: