The Energy Report 01/31/20
WHO are You?
The Word Health Organization (WHO) seemed to calm markets after they declared the coronavirus outbreak a public-health emergency of international concern but at the same time suggested that the disease should not unnecessarily interfere with international travel and trade. The later part of that announcement seemed to remove a lot of fear. Yet overnight that fear may be creeping back in because despite that proclamation that it should not interfere with travel and trade, the fact is, it already has. The coronavirus has spread from China to around 20 countries, killing more than 200 people.
It also did not help to see that China’s manufacturing sector was struggling before the reports of the outbreak happened. Reuters reported that China’s Purchasing Managers’ Index (PMI) fell to 50.0 in January from 50.2 in December, China’s National Bureau of Statistics (NBS) said on Friday. The reading was in line with analysts’ forecasts and hit the neutral 50-point mark that separates growth from contraction on a monthly basis.
Still oil did come back from the key support at 5150 but going into the weekend, some traders might fear being long. After the coronavirus sell-off last Sunday and Monday, traders could get caught if there is a sense that the virus is going to spread. It could rally if there is a sense that there will be a time frame when things will get back to normal. Yet in the meantime, canceled flights, closed factories and trains that are not moving is going cause a major hit to demand.
In response, OPEC is thinking about an emergency meeting. Yet that may not happen. Bloomberg News reported that Saudi Arabia’s push to convene an emergency OPEC+ meeting next month, bringing forward a gathering scheduled for March, ran into resistance from its key oil-market ally, Russia. Bloomberg says that the kingdom, the biggest member of the Organization of Petroleum Exporting Countries, has consulted with fellow producers on expediting the meeting — currently lined up for March 5 to 6 — amid growing alarm that Asia’s coronavirus outbreak will weaken oil demand, several delegates said. As of Thursday evening, the process was temporarily on hold after encountering a variety of scheduling obstacles, delegates said. Whether talks resume will depend on movements in oil prices, one of the delegates said.
Forget that bullish natural gas report. It does not matter that they are predicting spring in February. Marketwatch reported that, “the U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 201 billion cubic feet for the week ended Jan. 24. That was a bit less than the decline of 207 billion cubic feet forecast by analysts polled by S&P Global Platts. Total stocks now stand at 2.746 trillion cubic feet, up 524 billion cubic feet from a year ago, and 193 billion cubic feet above the five-year average, the government said.
The overall stock market should also get a bounce when, if as expected, the Senate votes to acquit President Donald Trump. So Democrats, after spending billions of dollars on phony investigations and a partisan impeachment, have lost again in their quest to get rid of the President. Are they tired of losing yet? Can we get those billions back? I think the country might have had a much better use for those funds. Like cleaning up the homeless populations in Congressman Adam Schiff’s and Nancy Pelosi’s districts. Or working on the opioid crisis or perhaps maybe using that money to fight to coronavirus. Democrats wasted billions of dollars of your money for political theater. You deserve better.
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The PRICE Futures Group
Senior Market Analyst & Author of The Energy Report
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