The Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, rose at a year over year 6.1% rate in January. That tops the 5.8% annual rate in December. Economists had been projecting a 6% increase for January.
Oil and other fossil fuels aren’t going to go quietly. And it’s extremely unlikely that the countries whose global power is predicated on oil are going to give up that power easily. From this viewpoint, the Russian invasion of Ukraine is the first in the next generation of energy wars, as fossil-fuel powers fight to extend their power into a new global energy age.
Yes, interest rates and the Federal Reserve and the Ukraine/Russia conflict are likely to dominate stock market direction this week, but don’t forget the power of the Iran/United States nuclear talks to move oil prices or the power of moves by Chinese regulators to wipe billions off the value of the country’s Internet stocks
Today what counts in the market is Vladimir Putin’s intentions. Jerome Powell? Maybe tomorrow. And that’s in spite of a jump in producer prices, which usually translates not consumer inflation.
Brent crude, the international oil benchmark, broke above $95 a barrel on Friday to an intraday high of $95.66 before closing at $94.44, up 3.31%. U.S. benchmark West Texas Intermediate closed ahead 3.58% to $93.1 after trading as high as $94.66. The short-term reason was increased fear of a wider shooting conflict between Russia and Ukraine. Long-term term, reason higher projections of global oil demand in 2022 from the International Energy Agency. The IEA raised its 2022 demand forecast and said it now expects global demand to expand by 3.2 million barrels per day this year. That would take demand to an all-time record.
International benchmark Brent crude jumped as much as 4.7% to $95 a barrel for the first time since 2014. Brent was up 23.68% and trading at $94.77 at 3 p.m. New York time Friday. U.S. benchmark West Texas Intermediate, which normally trades below Brent in price, was up 4% to $93.50 a barrel at 3 p.m. in New York.
OPEC+ meets tomorrow and the oil cartel and friends like Russia is expected to approve an increase in production that will reduce last year’s cuts in production. But the odds are that the decision won’t matter.
OPEC has decided that the current global economic recovery is very fragile and that the smart course is to raise production only gradually. The Organization of Petroleum Exporting Countries said the global oil market will switch from being under-supplied to over-supplied as early as next month. Which would certainly imply that oil prices are set to fall from today’s (November 16) close of $80.79 a barrel for U.S. benchmark West Texas Intermediate and $82.52 a barrel for international benchmark Brent. Oil hit a 7-year high of $85 a barrel in October. But you don’t have to look far to find those who don’t see oil falling from today’s levels–and who in fact see oil staying at elevated levels into 2022 or 2023.. At the end of October Goldman Sachs forecast $85 for 2023. BNP Paribas sees crude at almost $80 in 2023. Other banks including RBC Capital Markets have talked up the prospect of oil being at the start of a structural bull run. My view? There’s just too much noise pointing in competing directions to feel certain about any trend. (At least not certain enough to encourage me to put money on the line in my portfolio.) But, if I had to pick a side, I’d go with the “oil will move lower from here” crowd.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My sixty-third YouTube video “Trend of the Week: Timing the Oil Stock Rally” went up today.
For the week ended on August 13, U.S. oil and natural gas companies added 9 oil and natural gas drilling rigs to bring the total rig count to 500. That’s up 256 rigs, or 105%, from a record low of 244 in the summer of 2020, according to Baker Hughes.
The dispute over oil production quotas between Saudi Arabia and the United Arab Emirates that blew up the OPEC+ meeting two weeks ago looks to be over. Under the compromise, the UAE will see its baseline production level rise to 3.65 million barrels per day when the current pact expires in April 2022, a source told Reuters. The current baseline for the UAE was around 3.17 million barrels per day. In exchange the UAE agreed to a Saudi proposal to extend the April 2022 production agreement until December 2022.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The thirty-second YouTube video “OPEC and the threat to green energy stocks” went up today.
