Optimism over U.S-Chinese Trade Pact Rallies Markets
December 27th, 2019
The optimism over China and the US continues to push this rally in the markets. President Trump stated the he and Chinese President Xi will have a signing ceremony for the Phase 1 China/US trade deal in early January. The idea of a signed deal further increases the positive outlook and rallied US equites to all time highs and also supported WTI crude oil prices.
Russia also came out with comments that support energy. Russia’s Energy Minister, Alexander Novak, said Russia had reduced its oil output, excluding gas condensate, by 240,000 bpd so far in December compared with level in October 2018. Russia pledged to cut its oil production including gas condensate by 228,000 bpd as part of a global deal. This may be short lived support because not long after this news Alexander came out and said exiting the OPEC + agreement in 2020 may be necessary. He said that later this summer when demand picks up a reduction of the quotas is possible.
Also helping to add some support under the markets was the news that China, Iran and Russia will hold joint naval drill starting on Friday in the Indian Ocean and Gulf of Oman. The China Defense Minister said the drill was a normal military exchange between the three armed forces and was in line with international law and practices.
Today the DOE inventory numbers will be released today and estimates from the Bloomberg survey are calling for crude to be down 1.4 million barrels. In gas the expectation is for a build of 1.522 million barrels and distillate are called up 611,000 barrels.
The Federal Reserve Bank of Dallas released economic data yesterday and it showed that there were 8100 jobs lost from December 2018 to October 2019 in Texas mining sector which included oil and natural gas extraction services. Reginal drilling fell by 30% through November.