Released October 13, 2023 | SUGAR LAND
en
Editorial by Geoffrey S. Lakings for Industrial Info Resources (Sugar Land, Texas)--October 2023: In my most recent September 2023 Crude & Products Featured content I wrote then that, "Bulls are stampeding because of perceived short supply driving tightness in these crude (& product markets). However, even then in that week's IIR's Market Scorecard; I inquired about where is rational, common sense; to the point where I was foolishly willing to get in front of the rampant Bull Train; to indicate we should see some retracement in price that week.
However, I got run over because it took quite some time before the retracement actually appeared. In fact, beginning last week Monday October 2nd when I wrote the following Market Scorecard synopsis:
So, I was ready to write my Reality Bites recent IIR Market Scorecard synopsis but then this past weekend -- as everybody is aware--war and an evolving and worsening humanitarian crisis broke out in the Middle East.
((such that--as written (& adapted) from Rice University's Office of the President--this ongoing turmoil in Israel and the Palestinian territories resonates deeply within our respective worlds, and one anticipates that this pain will persist in the coming months. During this time, our thoughts and support are with all those who are personally impacted by these events.)
Energyminute further postulates as to the reasons behind this aggressive attack.
Why now? Motives are still being figured out, but the attack comes just as Israel and regional power Saudi Arabia were working on normalizing diplomatic relations, with help from the U.S. Iran, the Middle East's other major regional power, strongly opposes Israel and was against the push for improved relations. According to the Wall Street Journal, senior members of Hamas and Hezbollah, another Iran-back militant group, helped plan the attack.
The impact: The war likely makes discussions between the U.S., Saudi Arabia and Iran more complicated, with nuclear deals, oil sanctions, and price caps already challenging discussions.
While Industrial Info Resources (IIR) news journalist Paul Wiseman wrote (October 11) how "Mideast Attacks Again Rattle Energy Markets"
With 1,600-plus reported dead and dozens taken hostage in Hamas' surprise attacks on Israel on Saturday, energy markets were predictably roiled.
In the aftermath, both West Texas Intermediate (WTI) and Brent Crude reversed weeklong price slumps. Also, Reuters reported that Israel has shut down natural gas production in the Tamar field, the country's second-largest offshore Mediterranean field. The nation's largest natural gas field, Leviathan, continues to produce, said Chevron, which operates both fields.
Precious metals also responded by going higher. New York spot prices for gold rose almost $28 per ounce over Friday's close, closing at $1,871 per ounce. That reversed a precipitous late-September crash that saw prices drop from around $1,945 to near $1,870 in about a week.
An attack where I thought--alongside many pundits--we would see a fairly significant geopolitical risk premium "baked into" the Brent & WTI markets of $5 to $7. However, at this time--though there was an immediate gap up when markets opened on Monday October 9--this has not yet happened with a roughly 3% tick up (equating to about $2.30 in price).
FXEmpire: WTI Crude: Natural Gas, WTI Oil, Brent Oil Forecasts--WTI Oil Breaks The Psychological $90.00 Barrier
Now that we have a seeming why (Energyminute) and that energy (commodity and stock) markets were rattled (IIR) though not yet a significant "spike" in crude... what else could be at play from a larger picture perspective.
Reuters writes, "With concern about a spillover over the long-running conflict to the wider stage, oil and other traditional global 'safety' plays caught a bid. Specific fears centered on oil supply implications if Iran were connected to the attacks and what it may mean for U.S. moves to cement closer ties between Saudi Arabia and Israel.
Saudi officials had reportedly told the White House on Friday they were willing to raise output next year as part of that proposed Israel deal. An increase in Saudi output would have helped to relieve tightness after months of supply cuts from key producers Saudi Arabia and Russia.
What's more, any direct connection to Iran's possible involvement would scupper any easing of sanctions there and affect an estimated 3% of world oil supply. The Wall Street Journal reported on Monday Tehran had helped Hamas plot the attack over several weeks.
Hhhmm so some of the recent Supply shortfall could have been abated with possibly Saudi Arabia and Iran bringing more barrels to Mr. Oil Market--which has been feeling a short squeeze of late. Of course proof of Iran's involvement will still need to be confirmed--which if true--would likely mean harsher sanctions to be levied and all that, that would entail.
And, Paul Wiseman of IIR further speaks to how Israel plays a key role in other sectors like electronics, agriculture, and machinery and how these sectors might be impacted.
"Mideast Attacks Again Rattle Energy Markets" cont.
Shipping Lanes
As Israel is a hotbed of electronics development and manufacturing, the safety of port cities is also of note, says maritime safety tracker Dryad Global. The Mediterranean ports closest to Gaza, Ashkelon and Ashdod, are at greatest risk. In fact, Dryad Global referenced social media posts from Ashkelon showed vehicles ablaze at the port there, presumably from Gaza-launched missiles. Due to the missiles' short range, the more northerly port at Haifa and the Red Sea port of Eilat are considered to be at little risk.
Should hostilities continue or escalate, says the report, "Commercial undertakings are bound to face disruptions in the immediate future. Prolonged disturbances at Israel's three largest ports--Haifa, Ashdod, and Eilat--could severely hamper imports and exports, encompassing vital sectors like agriculture, electronics, and machinery."
Note: for those who wish to know more about what is happening I would suggest following along as Rice University's Baker Institute Experts React (..to..): The Latest Israel-Hamas War
The surprise attack on Israel by the militant group Hamas raises a number of critical questions related to intelligence, geopolitics, energy, and other global affairs. Baker Institute fellows and scholars are providing expert analysis as the conflict unfolds.
Fortunately, IIR's peerless Research is providing updates on energy & other infrastructure assets in this Middle East Region of the world.
In other crude and product market news back stateside, U.S. inventories had a large unexpected build, vastly different than what market experts were expecting.
Reuters: Oil reverses gains after US posts large crude build
Oil prices reversed early gains on Thursday in a volatile session, after a large build in U.S. crude stockpiles outweighed expectations that U.S. interest rates had peaked.
Brent futures settled up 18 cents to $86.00 per barrel. U.S. West Texas Intermediate crude fell 58 cents to $82.91 a barrel. Prices had risen more than $1 a barrel earlier in the session.
Prices pared gains after U.S. government data showed U.S. crude inventories rose by 10.2 million barrels in the last week to 424.2 million barrels, much higher than analyst expectations for a 500,000-barrel rise.
Obviously these fundamentals are weighing on price; though from a technical perspective there is a understandably a short term bullish inclination.
FX Empire: Natural Gas, WTI Oil, Brent Oil Forecasts -- Rhythms of the Energy Market Ballet
On October 12, the technical perspective for WTI Crude Oil (WTI) demonstrates a fascinating landscape. Utilizing a 4-hour chart timeframe, the pivot point for this commodity has been pegged at $85.32. When looking towards the upside, immediate resistance is encountered at $89.17, followed by higher resistances at $95.61 and $99.46.
Conversely, on the downside, immediate support is anchored at $78.95, with subsequent supports layered at $75.10 and $68.66.
In addition, the 50-day Exponential Moving Average (EMA) for WTI Oil stands at $85.88. Observationally, the price of WTI Oil is just above the 50 EMA, indicating a short-term bullish inclination. However, if the price breaches below $85.92, a bearish trend could be inferred, potentially spotlighting a double top pattern. Otherwise, the sentiment leans bullish.
And, one is aware that Reality Biting this past week+ is in regards to a realization of the truth of macroeconomic factors likely indicating higher interest rates from Central Banks for longer.
Yahoo! Finance: (Bloomberg) Oil Drops Below $90 on Macroeconomic Gloom, High Interest Rates Oil fell, with the US benchmark tumbling below $90 a barrel, as worries about further interest rate increases and a slowdown in the economy roiled broader markets. The S&P 500 slipped and the dollar rose, with investors awaiting clues about the path of Federal Reserve interest rate policy. Prices held onto losses as Fed Chief Jerome Powell appeared at a roundtable discussion on Monday. Officials have indicated rates are likely to remain high, while JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon sees the possibility of them climbing more.
Along with a stronger dollar--more so as a safe haven in these turbulent geopolitical times.
WSJ: Dollar's Resurgence Is a Headache for the Rest of the World
Surging Treasury yields help send the U.S. currency to its best quarter in a year
The dollar has bounced back with a vengeance, threatening global central bankers' tricky task of bringing down inflation while protecting fragile economic growth.
The greenback on Monday reached its highest level of the year, bringing its gain since mid-July to 6.6%. The WSJ Dollar Index last week closed out its best quarter since last fall, when it was in the midst of a once-in-a-generation run-up. Some emerging-market currencies have been hit especially hard, with the dollar rising 11% against the Chilean peso and almost 8% against the Hungarian forint.
With Bloomberg reporting at close that higher for longer is very much still in the proverbial cards.
US consumer prices advanced for a second month, likely reinforcing the Federal Reserve's stated intent to keep interest rates high to further slow inflation. The so-called core consumer price index, which excludes food and energy costs, increased 0.3% in September, Bureau of Labor Statistics data showed Thursday. Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI. That latter climbed 0.4%, boosted by energy costs. Recent inflation data underscore how a strong labor market continues to drive consumer demand, which may keep price pressures above the Fed's 2% target. -- David E. Rovella
And, we are still waiting on the Dragon's (China) economic resurgence--with news that we might have to wait yet longer.
Reuters: Most Japanese firms expect China's economic slowdown to persist into 2025
Most Japanese companies expect a slowdown in China's economy to persist into 2025, with nearly two thirds of firms that operate there looking to shift some production elsewhere in search of sales in other markets, according to a Reuters monthly poll.
That cautious outlook comes even though recent data suggests that an economy weighed down by infrastructure project debt and a downturn in property values has bottomed out. China's factory activity in September expanded for the first time in six months, with sales growth accelerating in August.
So how will all of this seeming market craziness play out? Will common sense return is anyone's guess but nonetheless let IIR Energy's Dedicated Market Research place the world at your fingertips.. Tomorrow's News Today. Ask us! We have Answers!
As your feedback is very important to us, please let us know if we may provide additional color or answer any other market questions you may have by replying to this note.
Additional IIR Resources:
However, I got run over because it took quite some time before the retracement actually appeared. In fact, beginning last week Monday October 2nd when I wrote the following Market Scorecard synopsis:
So, I was ready to write my Reality Bites recent IIR Market Scorecard synopsis but then this past weekend -- as everybody is aware--war and an evolving and worsening humanitarian crisis broke out in the Middle East.
((such that--as written (& adapted) from Rice University's Office of the President--this ongoing turmoil in Israel and the Palestinian territories resonates deeply within our respective worlds, and one anticipates that this pain will persist in the coming months. During this time, our thoughts and support are with all those who are personally impacted by these events.)
Energyminute further postulates as to the reasons behind this aggressive attack.
Why now? Motives are still being figured out, but the attack comes just as Israel and regional power Saudi Arabia were working on normalizing diplomatic relations, with help from the U.S. Iran, the Middle East's other major regional power, strongly opposes Israel and was against the push for improved relations. According to the Wall Street Journal, senior members of Hamas and Hezbollah, another Iran-back militant group, helped plan the attack.
The impact: The war likely makes discussions between the U.S., Saudi Arabia and Iran more complicated, with nuclear deals, oil sanctions, and price caps already challenging discussions.
While Industrial Info Resources (IIR) news journalist Paul Wiseman wrote (October 11) how "Mideast Attacks Again Rattle Energy Markets"
With 1,600-plus reported dead and dozens taken hostage in Hamas' surprise attacks on Israel on Saturday, energy markets were predictably roiled.
In the aftermath, both West Texas Intermediate (WTI) and Brent Crude reversed weeklong price slumps. Also, Reuters reported that Israel has shut down natural gas production in the Tamar field, the country's second-largest offshore Mediterranean field. The nation's largest natural gas field, Leviathan, continues to produce, said Chevron, which operates both fields.
Precious metals also responded by going higher. New York spot prices for gold rose almost $28 per ounce over Friday's close, closing at $1,871 per ounce. That reversed a precipitous late-September crash that saw prices drop from around $1,945 to near $1,870 in about a week.
An attack where I thought--alongside many pundits--we would see a fairly significant geopolitical risk premium "baked into" the Brent & WTI markets of $5 to $7. However, at this time--though there was an immediate gap up when markets opened on Monday October 9--this has not yet happened with a roughly 3% tick up (equating to about $2.30 in price).
FXEmpire: WTI Crude: Natural Gas, WTI Oil, Brent Oil Forecasts--WTI Oil Breaks The Psychological $90.00 Barrier
Now that we have a seeming why (Energyminute) and that energy (commodity and stock) markets were rattled (IIR) though not yet a significant "spike" in crude... what else could be at play from a larger picture perspective.
Reuters writes, "With concern about a spillover over the long-running conflict to the wider stage, oil and other traditional global 'safety' plays caught a bid. Specific fears centered on oil supply implications if Iran were connected to the attacks and what it may mean for U.S. moves to cement closer ties between Saudi Arabia and Israel.
Saudi officials had reportedly told the White House on Friday they were willing to raise output next year as part of that proposed Israel deal. An increase in Saudi output would have helped to relieve tightness after months of supply cuts from key producers Saudi Arabia and Russia.
What's more, any direct connection to Iran's possible involvement would scupper any easing of sanctions there and affect an estimated 3% of world oil supply. The Wall Street Journal reported on Monday Tehran had helped Hamas plot the attack over several weeks.
Hhhmm so some of the recent Supply shortfall could have been abated with possibly Saudi Arabia and Iran bringing more barrels to Mr. Oil Market--which has been feeling a short squeeze of late. Of course proof of Iran's involvement will still need to be confirmed--which if true--would likely mean harsher sanctions to be levied and all that, that would entail.
And, Paul Wiseman of IIR further speaks to how Israel plays a key role in other sectors like electronics, agriculture, and machinery and how these sectors might be impacted.
"Mideast Attacks Again Rattle Energy Markets" cont.
Shipping Lanes
As Israel is a hotbed of electronics development and manufacturing, the safety of port cities is also of note, says maritime safety tracker Dryad Global. The Mediterranean ports closest to Gaza, Ashkelon and Ashdod, are at greatest risk. In fact, Dryad Global referenced social media posts from Ashkelon showed vehicles ablaze at the port there, presumably from Gaza-launched missiles. Due to the missiles' short range, the more northerly port at Haifa and the Red Sea port of Eilat are considered to be at little risk.
Should hostilities continue or escalate, says the report, "Commercial undertakings are bound to face disruptions in the immediate future. Prolonged disturbances at Israel's three largest ports--Haifa, Ashdod, and Eilat--could severely hamper imports and exports, encompassing vital sectors like agriculture, electronics, and machinery."
Note: for those who wish to know more about what is happening I would suggest following along as Rice University's Baker Institute Experts React (..to..): The Latest Israel-Hamas War
The surprise attack on Israel by the militant group Hamas raises a number of critical questions related to intelligence, geopolitics, energy, and other global affairs. Baker Institute fellows and scholars are providing expert analysis as the conflict unfolds.
Fortunately, IIR's peerless Research is providing updates on energy & other infrastructure assets in this Middle East Region of the world.
In other crude and product market news back stateside, U.S. inventories had a large unexpected build, vastly different than what market experts were expecting.
Reuters: Oil reverses gains after US posts large crude build
Oil prices reversed early gains on Thursday in a volatile session, after a large build in U.S. crude stockpiles outweighed expectations that U.S. interest rates had peaked.
Brent futures settled up 18 cents to $86.00 per barrel. U.S. West Texas Intermediate crude fell 58 cents to $82.91 a barrel. Prices had risen more than $1 a barrel earlier in the session.
Prices pared gains after U.S. government data showed U.S. crude inventories rose by 10.2 million barrels in the last week to 424.2 million barrels, much higher than analyst expectations for a 500,000-barrel rise.
Obviously these fundamentals are weighing on price; though from a technical perspective there is a understandably a short term bullish inclination.
FX Empire: Natural Gas, WTI Oil, Brent Oil Forecasts -- Rhythms of the Energy Market Ballet
On October 12, the technical perspective for WTI Crude Oil (WTI) demonstrates a fascinating landscape. Utilizing a 4-hour chart timeframe, the pivot point for this commodity has been pegged at $85.32. When looking towards the upside, immediate resistance is encountered at $89.17, followed by higher resistances at $95.61 and $99.46.
Conversely, on the downside, immediate support is anchored at $78.95, with subsequent supports layered at $75.10 and $68.66.
In addition, the 50-day Exponential Moving Average (EMA) for WTI Oil stands at $85.88. Observationally, the price of WTI Oil is just above the 50 EMA, indicating a short-term bullish inclination. However, if the price breaches below $85.92, a bearish trend could be inferred, potentially spotlighting a double top pattern. Otherwise, the sentiment leans bullish.
And, one is aware that Reality Biting this past week+ is in regards to a realization of the truth of macroeconomic factors likely indicating higher interest rates from Central Banks for longer.
Yahoo! Finance: (Bloomberg) Oil Drops Below $90 on Macroeconomic Gloom, High Interest Rates Oil fell, with the US benchmark tumbling below $90 a barrel, as worries about further interest rate increases and a slowdown in the economy roiled broader markets. The S&P 500 slipped and the dollar rose, with investors awaiting clues about the path of Federal Reserve interest rate policy. Prices held onto losses as Fed Chief Jerome Powell appeared at a roundtable discussion on Monday. Officials have indicated rates are likely to remain high, while JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon sees the possibility of them climbing more.
Along with a stronger dollar--more so as a safe haven in these turbulent geopolitical times.
WSJ: Dollar's Resurgence Is a Headache for the Rest of the World
Surging Treasury yields help send the U.S. currency to its best quarter in a year
The dollar has bounced back with a vengeance, threatening global central bankers' tricky task of bringing down inflation while protecting fragile economic growth.
The greenback on Monday reached its highest level of the year, bringing its gain since mid-July to 6.6%. The WSJ Dollar Index last week closed out its best quarter since last fall, when it was in the midst of a once-in-a-generation run-up. Some emerging-market currencies have been hit especially hard, with the dollar rising 11% against the Chilean peso and almost 8% against the Hungarian forint.
With Bloomberg reporting at close that higher for longer is very much still in the proverbial cards.
US consumer prices advanced for a second month, likely reinforcing the Federal Reserve's stated intent to keep interest rates high to further slow inflation. The so-called core consumer price index, which excludes food and energy costs, increased 0.3% in September, Bureau of Labor Statistics data showed Thursday. Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI. That latter climbed 0.4%, boosted by energy costs. Recent inflation data underscore how a strong labor market continues to drive consumer demand, which may keep price pressures above the Fed's 2% target. -- David E. Rovella
And, we are still waiting on the Dragon's (China) economic resurgence--with news that we might have to wait yet longer.
Reuters: Most Japanese firms expect China's economic slowdown to persist into 2025
Most Japanese companies expect a slowdown in China's economy to persist into 2025, with nearly two thirds of firms that operate there looking to shift some production elsewhere in search of sales in other markets, according to a Reuters monthly poll.
That cautious outlook comes even though recent data suggests that an economy weighed down by infrastructure project debt and a downturn in property values has bottomed out. China's factory activity in September expanded for the first time in six months, with sales growth accelerating in August.
So how will all of this seeming market craziness play out? Will common sense return is anyone's guess but nonetheless let IIR Energy's Dedicated Market Research place the world at your fingertips.. Tomorrow's News Today. Ask us! We have Answers!
As your feedback is very important to us, please let us know if we may provide additional color or answer any other market questions you may have by replying to this note.
Additional IIR Resources:
- IIR Team Email: iirteam@iirenergy.com
- Latest IIR Crude & Products Market Scorecard
