US Negotiates Vaccine Purchase
August 18, 2020
The market has been pretty uneventful and stuck in a tight range with high intraday volatility. RBOB futures appear that they still might have one more pop higher left before expiration at the end of this month. ULSD and WTI crude oil seems really stuck in their ranges and any upside appears it would be just to the top of the recent ranges or maybe a slightly higher high.
Crude prices got some support yesterday from reports that OPEC+ members were at roughly 97% compliance in July for their quotas. OPEC+ had cut 9.7 million barrels from their benchmark rates from May through July and then in August they were only cutting 7.7 million bpd. OPEC members Iraq, Nigeria, and Kazakhstan had all over produced their quotas and have said they would cut more barrels from their production then required to make up for past over production. On Wednesday the Joint Ministerial Monitoring Committee (JMMC) of OPEC+ will meet to review compliance in the oil output cut agreement. The JMMC is expected to stay the course with the 7.7 million bpd output cuts.
The US government completed negotiations to by 100 million vaccines for COVID-19 from Maderno, the bio-tech firm, for $1.525 billion. A vaccine is expected in the next 4-8 weeks. I am not sure if this is political news fodder or real progress.
China had continued to increase their purchases of US crude as China and the US were headed into talks to review the phase one trade deal. As reported yesterday China had booking for 14 to 20 million barrels for September. Those talks have now been postponed indefinably as trade relations deteriorate so it will be interesting to see if China continues with its strong crude buying. If all those September bookings do get done it will double the volume that was set for August.
Reuters is reporting the following. “The Trump administration on Monday finalized a plan to allow oil and gas drilling in Alaska’s Arctic National Wildlife Refuge, putting it on track to issues decades-long leases in the pristine wilderness area before a potential change in US leadership. “ The Biden administration has made it clear in their agenda that they would seek to permanently protect the Alaskan Arctic National Wildlife Refuge from oil discovery.
The following comments and chart are from Bloomberg. Put out by Joe Weisenthal and editor at Bloomberg. I like it because I have been confused about some of these things on many fronts and this is good commentary and insight. I have said this before that the many markets continue to look at positives and discount all the negative data and trade higher. Here is the Bloomberg piece.
The economic data continues to demonstrate that we’re living through one of the strangest crises ever. Many of the contradictions are well known. Unemployment is sky high, yet household income has grown since the start of the year. Meanwhile the housing market is booming. Any yet homeowners are in trouble. Here’s a chart put together by my Bloomberg TV colleague Dan Curtis that shows the oddness. The teal line is from yesterday’s homebuilder sentiment report, which is at record levels. It gauges customer buyer traffic, and its’s through the roof as more and more people are looking at homes. The white line however shows the quarterly rate of mortgage delinquencies. It’s also soaring. You can look back, and see that this doesn’t typically happen. Normally when delinquencies are soaring, (such as the last crisis) there aren’t a lot of new homebuyers out there. And vice versa, usually when there’s a homebuying boom, the conditions are such that delinquencies are low. There’s a lot of confusion about what’s going on, and charts like this are part of the reason why.