Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
U.S. oil production almost doubled in the past decade, so it's odd that many North American investors believe that Saudi Arabia should be the country to cut production. In any event, reductions in Saudi Arabian oil on the market became less likely over the weekend with the naming of a new oil minister,
"[Khalid] Al-Falih, also chairman of the state producer Saudi Arabian Oil Co., said on his first day in office on Sunday that he will maintain the kingdom's oil policy. His predecessor, Ali al-Naimi, had been leading a policy prioritizing sales over prices since 2014, driving some higher-cost producers, including U.S. shale drillers, off the market. In so doing, Saudi Arabia boosted output, adding to a supply glut. The strategy is showing signs of succeeding this year, with prices gaining more than 60 per cent since tumbling to a 12-year low in January."
For a more detailed view of new oil minister Al Falih's forecast for oil markets, a helpful video from the most recent Davos conference is here .
"Saudi's New Oil Boss Vows to Maintain Policy" – Bloomberg
"After 20 Years, OPEC Bids Farewell to Saudi Arabia Oil Chief" – Bloomberg
See also "@EnergyRosen Oil Glut? What Glut?" with extensive charts from BNP research – Twitter
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The Zero Hedge blog has predicting about 600 out of the last two market calamities, so when they write "China is crashing'" it's a good idea to take it with a large grain of salt. Still, there are signs of growing problems in the world's second largest economy. Chinese trade data over the weekend was received as a sign of economic stability, but a closer look revealed strength is likely a mirage.
A chart from Nomura Research showed that the vast majority of strength in Chinese imports came from a 200 per cent year over year jump in imports from Hong Kong – trade growth in the rest of the world was flat. The allegedly widespread practise of 'fake invoicing' makes this number unreliable. Previously, Chinese companies would report a surge in Hong Kong goods that didn't actually exist, as cover to move funds off the mainland.
"@kitjuckes Nomura via ZH: Chart of the day. Enough said " – Twitter
"Even China's Party Mouthpiece Is Warning About Debt" – Bloomberg Gadfly
"@moved_average " #China | imports from HK STILL hilarious... pic.twitter.com/KNfRDaCZUC – Twitter
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In related China news, iron ore and steel prices are falling hard as regulators crack down on speculation. Trading in iron and steel futures was halted as prices fell by more than five per cent.
"China steel, iron ore futures dive as demand worries batter commodities" – Reuters
"Iron Ore in Free Fall as Port Holdings Expand, Trade Frenzy Ebbs" – Bloomberg
"Here Are the Cracks in China's Steel Story" – Wall Street Journal
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Metals are lower but oil is trading higher because of expected supply disruptions resulting from the Fort McMurray wildfire. Longer dated futures, however, are not moving higher which means the market does not expect supply to be cut for long.
"Oil rises after Canada fire knocks out production" – Reuters
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Tweet of the Day: "@DuncanWeldon Grim chart of the day is from @CEAChair voxeu.org/article/fiscal… pic.twitter.com/PlkdOSsFp0 " – Twitter
Diversion: "Here Are the 5 Ugliest Endangered Animals" – Sploid
Scott Barlow