Global stock and commodity prices are flying as the market is expecting that President-elect Donald Trump will undo the over-regulation that has put the economy in shackles these long 8 years. There is growing excitement that the removal of the Dodd-Frank law and the repeal and replacement of Obamacare, and massive infrastructure and defense spending will allow the economy to finally grow.
We are seeing big moves not only in stocks but in industrial metals like copper, platinum, palladium and silver. We will see U.S. oil and gas production surge as attempts by the federal government to take away oversight of fracking from the states to the federal government will fail. In the short term that may be a bit bearish as the International Agency warns, but not in the longer term.
The increased production will be needed to meet the expected increase in demand due to Trump’s pro-growth policy and the demand will be met by American Producers instead of OPEC. The markets are starting to realize that a lot of the economic pain that we have gone through in recent years has been self-imposed by over-reaching and bad regulation that has held back the economy and has led to one of the most anemic economic recoveries in U.S. history.
The crude oil market is weaker than some of the other commodities because of the strength of the dollar and a bearish warning from the International Energy Agency (IEA) that is warning of what they call “relentless supply growth” unless OPEC makes a deal to cut production. MarketWatch reports that OPEC’s crude output rose for the fifth consecutive month in October after production recovered in Nigeria and Libya and flows from Iraq hit an all-time high of 4.59 million barrels a day.
OPEC's task of trimming global oil supplies is further challenged by producers outside the cartel, such as Russia, Brazil, Canada and Kazakhstan, which are also ramping up the amount they produce, the IEA said. "This means that 2017 could be another year of relentless global supply growth like that seen in 2016," the IEA said. Bloomberg reports that supply growth from nations outside the Organization of Petroleum Exporting Countries will be “just shy” of 500,000 barrels a day, an increase of 110,000 from the agency’s forecast last month, it said Thursday. Russian production is likely to grow by 190,000 barrels a day, building on a 230,000-barrel increase in 2016.
But does that doomy and gloomy prediction mesh with the potential increasing demand growth? As Trump looks to pull out of the Paris Global Warming agreement, the expectations that demand for oil that is already near a record high in the U.S. might go even higher. Trump will raise not only production expectations but demand expectations as well. Oil demand does reflect economic activity. The repealing of the ending the war on coal and a top-down review of all anti-coal regulations issued by the Obama Administration sould be a boom for the economy and commodity prices as well.
Natural gas though is being held back by weather. As Platts reported, "The Nymex December natural gas futures contract swung almost 13 cents from early Wednesday to settle 5.7 cents higher at $2.690/MMBtu despite expectations for storage inventories to set a record Thursday and projections for above-average temperatures to continue into the latter half of November. Per Phil Flynn, senior market analyst with Price Futures Group, a possible jolt to the natural gas market came in the form of a one-two punch of oil prices rebounding and the stabilization of the stock market following the announcement of the election of Donald Trump as president-elect, helping to provide a "relief rally" in the natural gas market.
However, movement of the prompt-month contract may be heavily influenced by the upcoming U.S. EIA weekly gas storage report and the National Weather Service's latest weather projections calling for above-average temperatures over the Chicago and New York City markets into the latter half of November. A consensus of analysts surveyed by S&P Global Platts estimate a 51-Bcf build for the week ended November 4, which would push storage levels above the previous record of 4.009 Tcf nearly two weeks earlier than 2015. An injection in this range would sit below the 58-Bcf from a year ago, but well above the five-year average of 38 Bcf.