Energy Markets Rallied on Trade Progress
December 11th, 2019
The inventory report from the API called crude stocks up 1.4 million barrels, this was a bit of a surprise as the outlook for today’s DOE is that crude stock will decline 2.8 million barrels. The crude stocks at Cushing, Ok were down 3.5 million barrels, which was a big number.
Gasoline stocks were up 4.9 million barrels and the outlook for today is that gasoline stocks will increase 2.5 million barrels. This was the fifth week that gasoline stock built in the API report. Distillates were up 3.2 million barrels and the estimates for today are for stocks to be up 1.6 million barrels.
The energy markets rallied yesterday on good news that the United States and China are coming closer on a trade deal to possibly delay the December 15th tariffs.
The EIA in their monthly short-term energy outlook report raised WTI and Brent crude oil prices forecast for 2020 by $0.42 each and lowered US crude oil production by 115,395 bpd for 2020. In addition , EIA lowered world petroleum supply forecast by 295,367 bpd and lowered world petroleum demand by only 129,000 bpd. The net result was a 164,288 bpd less oil.
The average estimates for today’s propane inventory update are that stocks will decline by 1.9 million barrels. The 5-year average decline for this reporting week of the year is 1.6 million barrels.
The Wall Street Journal reports that Chevron Corp. is writing down the value of its assets by more than $10 billion, a concession that in an age of oil and gas overabundance, some will not be profitable anytime soon.
Top officials from Canada , Mexico and the US signed a fresh overhaul of the reginal trade pact yesterday. The signing ceremony in Mexico City launched what may be the final approval effort for US President Donald Trump’s three-year quest to revamp the 1994 North American Free Trade Agreement. The US-Mexico-Canada Agreement was signed more than a year ago to replace NAFTA but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before bringing it to a vote.
Saudi Arabia’s King Salman opened a gulf Arab summit on Tuesday by calling for regional unity to confront Iran and secure energy supplies and maritime channels. He also urged the global community to address Iran’s nuclear and ballistic missile programs.
There was also some weak economic data out of China. Their PPI came in at -1.6 while the CPI came in at -1.4. This take the year on year CPI to just 4.5%. China is slowing down. On that front the December 15th tariffs will be a big deal for this market over the next 4 days. Sunday is the 15th and as of now the increase in tariffs is still set to take place. If that happens it will not be a positive for the markets. But if they do get pushed back it will be a positive for the markets.