Investment Commentary – September 16, 2019
Year to Date Market Indices as of Market Close September 16, 2019
• Dow 27,076 (16.07%)
• S&P 2,997 (19.59%)
• NASDAQ 8,153 (22.88%)
• Gold $1,505 (17.19%)
• Oil $61.90 (35.12%)
• Barclay Bond Aggregate (7.70%)
• All World Index (15.79%)
• Fed Funds Rate 2.25 (-0.25 rate cut 7/31/19)
• US Real GDP Growth 2.0 Q2/2019 (Down from 3.1 in Q1)
Why Saudi Arabia’s output hit won’t lead to shocking prices at the gas pump
Attack on Saudi Arabia oil facilities mark ‘fortunate’ timing
Global crude production has taken a serious hit following the weekend attack on Saudi oil facilities, leading to a spike in oil prices, but for gasoline — and U.S. drivers — this market-moving event couldn’t have come at a better time.
“Motorists are lucky this didn’t happen during summer driving season,” said Patrick DeHaan, head of petroleum analysis at GasBuddy. Labor Day on Sept. 2 marked the end of the season.
Gasoline prices at the pump are little changed since the Saturday attack on Saudi Arabia’s oil facilities cut an estimated 5.7 million barrels a day from the kingdom’s oil production, equal to more than 5% of the world’s daily supply.
On Monday afternoon, the average per-gallon price for regular gasoline stood at $2.560, compared with yesterday’s average of $2.559, according to gas-price tracker GasBuddy.
Read: Global oil surges after Saudi ‘supply shock’
The “timing is fortunate,” said Denton Cinquegrana, chief oil analyst at the Oil Price Information Service by IHS Markit. “If this happened four months ago, we could be talking about a much more significant retail [gasoline] price spike.”
However, this is the time of year when the market has switched away from the summer gasoline blends, which are required to meet tougher environmental standards, toward winter blends, which are cheaper and easier to make, he said.
Saudi Arabia was producing around 9.6 million to 9.7 million barrels of oil a day before the attack, so this is “a serious hit, but this will be measured in days, weeks or months,” said Cinquegrana.
He also pointed out that the amount of oil the U.S. imports from Saudi Arabia has reached its lowest level in at least a decade.
In May of this year, the U.S. imported 462,000 barrels a day of oil and petroleum products from Saudi Arabia, the lowest monthly figure since March 1987, according to the Energy Information Administration, based on data going back to January 1977.
Oil prices are up but a recession isn’t looming: Nancy Lazar
Oil prices may be soaring, but the long-term impact on the United States economy and consumers is likely to be limited, according to one economist who said that a recession is not in the offing.
Attacks on Saudi oil fields and refineries have hit the global economy hard, with oil prices up 20 percent on Monday. Those concerns hit markets on Monday, with the three indexes all showing substantial losses in morning trading.
Oil prices may be soaring, but the long-term impact on the United States economy and consumers is likely to be limited, according to one economist who said that a recession is not in the offing.
Attacks on Saudi oil fields and refineries have hit the global economy hard, with oil prices up 20 percent on Monday. Those concerns hit markets on Monday, with the three indexes all showing substantial losses in morning trading.
“So far, quite frankly, I would say the increase in oil prices is not going to be a game-changer for the US economy,” Lazar said. “You need to see something up well over $100 [a barrel] for a sustained period of time, based on what I went and looked back yesterday, to really push the economy into a recession.”
Bartiromo pushed Lazar on if she thinks the Saudi attacks would trigger a worldwide decline in the markets.
“I’m not raising the odds of a recession, no,” Lazar said.
Around the web
Euro stimulus: In its final meeting under outgoing President Mario Draghi, the European Central Bank delivered bigger-than-expected stimulus measures in response to Europe’s recent economic slowdown. The ECB cut its key interest rate further into negative territory to minus 0.5% and relaunched a bond-buying stimulus program.
Anxiety eases: The U.S. stock market’s near recovery from August’s decline has been accompanied by a steep drop in a gauge of investors’ expectations for short-term market volatility. The Cboe Volatility Index has dropped more than 40% from a recent high on August 5.
Fed ahead: The U.S. Federal Reserve is expected to cut interest rates for the second time in two months when it concludes a two-day meeting on Wednesday. Most observers expect the Fed will approve a cut of a quarter of a percentage point in hopes of maintaining solid U.S. economic growth in the face of a potential global slowdown.
Goodwill gestures: Concessions by China and the United States fueled hopes that the trade rivals could reach an interim agreement when high-level negotiations resume in early October. China waived tariffs on some U.S. agricultural goods, including soybeans and pork, while the United States delayed the implementation of new tariffs by two weeks.
Upcoming this week:
Tuesday: U.S. Federal Reserve Board opens two-day policy meeting
Wednesday: U.S. Federal Reserve Board concludes two-day policy meeting, Chairman Jerome Powell holds press conference
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.
https://www.marketwatch.com/story/why-saudi-arabias-output-hit-wont-lead-to-shocking-prices-at-the-gas-pump-2019-09-16?mod=mw_theo_homepage
https://www.foxbusiness.com/energy/oil-prices-are-up-but-a-recession-isnt-looming-nancy-lazar
