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Oil falls as U.S. rights bill fuels tensions with China

  • Prices down for second straight day
  • U.S. inventories rise by 1.6 mln barrels
  • China warns U.S. of consequences over Hong Kong law

LONDON/TOKYO, Nov 28 (Reuters) – Oil prices fell for a second day on Thursday after official data showed U.S. crude and gasoline stocks rose and President Donald Trump signed into law a bill backing protesters in Hong Kong, fuelling tensions with China. Brent crude LCOc1 was down 26 cents, or 0.4%, at $63.80 a barrel by 1038 GMT, having dropped 0.3% on Wednesday. West Texas Intermediate crude CLc1 fell 27 cents, or 0.5%, to $57.84, after losing 0.5% in the previous session.

China warned the United States that it would take “firm countermeasures” in response to U.S. legislation backing anti-government protesters in Hong Kong.

Investors are concerned that the move might delay further a preliminary agreement between the United States and China to put an end to their trade war that has slowed global economic growth, and consequently consumption of oil. “The approval of the Hong Kong legislation backing protesters is likely to put the trade agreement into question as China has reiterated its threat of retaliation,” said Hussein Sayed, chief market strategist at FXTM. “If investors suspect that the trade agreement is under real danger, expect to see a sharp sell-off in December. For now, investors are taking a wait-and-see approach.” Crude stockpiles in the United States swelled by 1.6 million barrels last week as production rose to a record 12.9 million barrels per day (bpd) and refinery runs slowed, the Energy Information Administration said..

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Russia signals no change to its oil quotas at next week’s OPEC+ meeting

FILE PHOTO: Russian Energy Minister Alexander Novak speaks with the media outside the European Commission headquarters in Brussels, Belgium October 28, 2019. REUTERS/Yves Herman/File Photo
  • Russian oil producers meet energy minister
  • Oil firms propose keeping quotas unchanged until end of March
  • Companies support excluding gas condensate from output data

MOSCOW, Nov 28 (Reuters) – Russian oil companies proposed on Thursday not to change their output quotas as part of a global deal until the end of March, when the current agreement expires, putting pressure on OPEC+ to avoid any major shift in policy when the group meets next week. They also offered to exclude production of gas condensate, a light oil, from the output quotas as Russia has been struggling to meet its supply-reduction targets in recent months. The proposals to preserve the deal between the Organization of the Petroleum Exporting Countries and non-OPEC nations until the end of March were made at a gathering with Energy Minister Alexander Novak, who will attend next week’s meetings in Vienna. OPEC and its allies have so far been expecting to extend output cuts until mid-2020, with non-OPEC producer Russia supporting Saudi Arabia’s push for stable oil prices amid the listing of state oil giant Saudi Aramco.  On Thursday, Russian oil firms suggested to Novak that they meet again at the end of March to discuss the oil deal, Ravil Maganov, a first vice president of Russian oil major Lukoil  told reporters after the meeting. “We remain in the deal with the same quotas. We will meet at the end of the first quarter to discuss. Those are (our) proposals,” Maganov said. “We will stay in the deal until the end of March,” Yevgeny Tolochyok, head of Russneft said. Russia, other non-OPEC oil producers and OPEC nations are due to discuss their global output deal on Dec. 5-6. OPEC and non-OPEC oil producers have curbed output to balance the market and support prices for the last three years. Russia’s position on the deal is “currently a secret”, Novak said.

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Trump distances himself from Giuliani in O’Reilly interview

President Trump tried to distance himself from his personal lawyer Rudy Giuliani’s efforts related to Ukraine on Tuesday in an interview with radio host Bill O’Reilly. In the interview for BillOReilly.com, O’Reilly asked the president what Giuliani was, “doing in Ukraine on your behalf.”  “Well, you have to ask that to Rudy, but Rudy, I don’t, I don’t even know,” said Mr. Trump. “I know he was going to go to Ukraine, and I think he canceled a trip,” the president continued. “But, you know, Rudy has other clients, other than me. I’m one person.”  Mr. Trump then denied that he had ever directed Giuliani to go to Ukraine on his behalf. However, in May the New York Times reported that Giuliani had planned to go to Ukraine that month, to urge the government there to open several investigations that could aid the president. Nick Note: hear that thumbing sound? That’s Trump throwing Americas Mayor under the buss!

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N.Korea test fires rockets in Thanksgiving reminder of year-end deadline for U.S.

SEOUL, Nov 28 (Reuters) – Breaking a month-long lull in missile tests, North Korea fired two short range projectiles into the sea off its east coast on Thursday in what appeared to be the latest try out its new multiple rocket launchers, South Korea’s military said. The test-firing came as the clock ticks down on the year-end deadline that Pyongyang had given the United Stated to show flexibility in their stalled denuclearisation talks. It also coincided with the U.S. Thanksgiving holiday, and took place one day before the second anniversary of the North’s test of an intercontinental ballistic missile (ICBM) capable of hitting the U.S. mainland.  South Korea’s Joint Chiefs of Staff (JCS) said the North fired the two projectiles into the sea from launchers in the eastern coastal town of Yonpo at around 5 p.m. (0800 GMT). The rockets travelled up to 380 km (236 miles) and reached an altitude of 97 km (60 miles), the JCS said. Japanese Prime Minister Shinzo Abe said the launch was a threat to not only Japan but the region and beyond, though his defence ministry said the projectile did not enter Japanese airspace or its Exclusive Economic Zone. “We will remain in close contact with the United States, South Korea and the international community to monitor the situation,” Abe told reporters. The launch is the first since Oct. 31, when the North tested what it called super-large multiple rocket launchers, which had also been used in tests conducted in August and September that were overseen by North Korean leader Kim Jong Un. Kim has set an end-of-the-year deadline for denuclearisation talks with Washington, but negotiations have been at an impasse after a day-long working level meeting on Oct. 5 ended without progress. Analysts believe Pyongyang is trying to send a Thanksgiving reminder to the United States by demonstrating progress in weapons development on the anniversary of the 2017 ICBM test. Nick Note: Time for Kim Yon Num Chucks to send Trump some more love letters telling the greatest leader who has ever lived how great he is. That Way Kim can finish building his nuclear rocket based arsenal… Just in time to send the sleeping us back to stone age

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New York Fed Adds $108.95 Billion to Markets

Fed Chairman Jerome Powell said in remarks Monday in Rhode Island that ’it is essential that we at the Fed use our tools to make sure that we do not permit an unhealthy downward drift in inflation expectations and inflation.’ Photo: brendan mcdermid/Reuters

The Federal Reserve Bank of New York added $108.95 billion in temporary liquidity to the financial system on Wednesday. The intervention came in two parts. There were $87.95 billion in overnight repurchase agreements, or repos, and $21 billion in 15-day repos. The central bank took all the securities it was offered. Fed repo interventions take in Treasury and mortgage securities from eligible banks in what is effectively a short-term loan of central-bank cash, collateralized by the securities. The Fed has been intervening in markets in the current fashion since mid-September, when short-term rates unexpectedly shot up on a confluence of factors, although it has used similar operations for decades to manage short-term rates. The Fed’s interventions are aimed at ensuring that the financial system has enough liquidity and that short-term borrowing rates remain well-behaved, with the central bank’s federal-funds rate staying within the 1.5%-to-1.75% target range. The effective fed-funds rate stood at 1.55% on Tuesday. The broad general collateral rate for repo trading stood at 1.51%, also for Tuesday. Since the large interventions started, money-market rates have been well-behaved. The Fed is using temporary operations to tamp down on any possible volatility, while purchasing Treasury bills to build up reserves in the banking system. It hopes that by buying Treasury bills it will be able to cut back on repo interventions at the start of next year. The Fed currently expects to buy Treasury bills through the middle of next year.

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EIA Petroleum Report week ending November 22, 2019

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.6 million barrels from the previous week. At 452.0 million barrels, U.S. crude oil inventories are about 3% above the five year average for this time of year.   U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending November 22, 2019, which was 101,000 barrels per day less than the previous week’s average. Refineries operated at 89.3% of their operable capacity last week. Gasoline production increased last week, averaging 10.1 million barrels per day.
Distillate fuel production decreased last week, averaging 5.1 million barrels per day.
U.S. crude oil imports averaged 6.2 million barrels per day last week, up by 217,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.0 million barrels per day, 21.9% less than the same four-week period
last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 773,000 barrels per day, and distillate fuel imports averaged 238,000 barrels per day. Total motor gasoline inventories increased by 5.1 million barrels last week and are about 4% above the five year average for this time of year. Finished gasoline and
blending components inventories both increased last week. Distillate fuel inventories increased by 0.7 million barrels last week and are about 12% below the five year average for this time of year. Propane/propylene inventories decreased by 0.7 million barrels last week and are about 6% above the five year average for this time of year. Total
commercial petroleum inventories increased last
week by 0.1 million barrels last week. Total products supplied over the last four-week period averaged 21.2 million barrels pe rday, up by 0.5% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.2 million barrels per day, up by 0.5% from the same period last year. Distillate fuel product supplied averaged 4.4 million barrels per day over the
past four weeks, up by 4.5% from the same period last year. Jet fuel product supplied was
up 0.6% compared with the same four
-week period last year.
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Trump impeachment: White House aides can be made to testify

“Presidents are not kings.” Those words from a 120-page decision by US District Court Judge Ketanji Brown Jackson

A federal judge has ruled that White House staff can be made to testify before Congress, rejecting the Trump administration’s claims of immunity. The ruling specifically compels former White House counsel Don McGahn to testify to an inquiry into Russian interference in the 2016 US election. But it also has major implications for the Democrat-led impeachment inquiry against President Donald Trump. The justice department says it will appeal against the ruling. The impeachment inquiry is trying to establish whether Mr Trump pressured Ukraine’s president to investigate his political rival Joe Biden. The Trump administration has refused to co-operate with the impeachment inquiry and other Democrat-led investigations, directing current and former White House officials to defy subpoenas for testimony and documents. Mr McGahn, who left his post in October 2018, was called to appear before the House Judiciary Committee in May to answer questions about the president’s alleged attempts to impede the now-concluded Mueller investigation into Russian involvement in the 2016 presidential election. But in her ruling, US District Judge Ketanji Brown Jackson said that “no one is above the law”.

“Executive branch officials are not absolutely immune from compulsory congressional process – no matter how many times the executive branch has asserted as much over the years – even if the president expressly directs such officials’ noncompliance,” she wrote.

Judge Jackson also explicitly said the president “does not have the power” to stop his aides from responding to subpoenas from Congress – adding that “presidents are not kings”. “No one, not even the head of the Executive branch, is above the law,” Judge Jackson said. But she did say that Mr McGahn could invoke executive privilege “where appropriate”, to protect potentially sensitive information. Judiciary Committee chairman Jerrold Nadler said that he expects Mr McGahn to “follow his legal obligations and promptly appear before the Committee”.

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API Reports Crude Oil Build

The American Petroleum Institute (API) has estimated a crude oil inventory build of 3.639 million barrels for the week ending November 21, compared to analyst expectations of a 418,000-barrel draw in inventory. Last week saw a build in crude oil inventories of 5.954 million barrels, according to API data.  After today’s inventory move, the net draw has swung into build territory for the year, standing at 830,000 barrels for the 48-week reporting period so far, using API data. Oil prices were trading up on Tuesday prior to the data release on trade talk hopes for China and the United States surfaced again on Tuesday, with negotiators for both sides conversing today by phone. Still, no tangible progress has been made. At 2:48pm EST, WTI was trading up $0.24 (+0.41%) at $58.28—roughly $2.50 per barrel above last week’s prices. Brent was trading up $0.36 (+0.57%) at $62.98, up almost $2 a barrel from last week.  The API this week reported a build of 4.378 million barrels of gasoline for week ending November 21.

Distillate inventories saw a draw of 665,000 barrels for the week, while Cushing inventories fell by 516,000 barrels.

US crude oil production as estimated by the Energy Information Administration showed that production for the week ending November 15 stayed at the most recent high of 12.8 million bpd for a second week in a row.

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Oil higher as IEA head tells OPEC to think of global economy

Top oil producers that are cooperating with the Organization of the Petroleum Exporting Countries (OPEC) on output cuts are pressuring OPEC, but OPEC needs to come up with the “right” call to safeguard the global economy which is “very fragile,” International Energy Agency (IEA) Executive Director Fatih Birol said on Tuesday. The Turkish energy expert also stressed that because of expected lower production growth in the United States as a result of financial troubles facing shale producers in North America, “there will be lots of oil in the market.” January futures of West Texas Intermediate (WTI) crude oi rose 0.40% to $58.05 per barrel at 5:36 am ET while Brent due in the first month of 2020 gained 0.22% to go for $63.61 per barrel at 5:37 am ET.

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Optimism over U.S.-China trade deal could easily turn into pessimism

Rising U.S. stocks could quickly reverse themselves on the slightest shift in momentum

There are two pieces of news on the U.S.-China trade deal for investors to know today. First, China is promising more protection for intellectual property. Second, despite contradictory media reports about a trade deal, there is some credibility to Gao Lingyun, an expert who is apparently close to the trade talks, saying that the “two sides have reached a broad consensus” for the first part of an agreement. Wall Street is optimistic. Stocks are up — at a new record, in fact. How should investors think about these positive reports on trade?  The momo crowd is buying simply because the market is going up. The market is going up on performance chasing by money managers going into the year-end. However, this can quickly end on the slightest shift in momentum, as money managers may decide to lock in profits.  There is a mistaken belief that popular large-cap stocks such as Apple, Amazon, Facebook and Microsoft are safe. These stocks carry a heavy weighting in indexes. If the market sells off, the selling will first start in futures and ETFs. The large-cap stocks will be sold irrespective of their individual merits. Semiconductor stocks are leading indicators. Consider carefully watching stocks of Intel, AMD, Micron Technology and Nvidia NVDA. Also keep an eye on gold and silver. Which are seeing selling on the news from China. If there is a reversal in precious metals to the upside, that may be an early sign for more caution on the stock market.