After a strong start to the week for U.S. equities, continued pressure in Japan is holding back the risk appetite globally. The Nikkei is down 12% from its January high and while the cash index is down .65% on the session the futures have shed more than 3% from yesterday’s 4:00 p.m. Central close.
Crude oil hedge funds continue to run for the exits and are in part responsible for yesterday’s late-day swoon. Yet, despite market turmoil, the supply versus demand fundamentals for oil continue to be very bullish. Even the International Energy Agency (IEA), that hates to say anything bullish about oil, is acknowledging that despite their prior doubts that OPEC and their Non-OPEC coconspirators have succeeded in removing the global oil glut.
It's been quite a tumultuous week in the markets, as we all know, but something seems amiss.....on Thursday when the Bank of England's Mark Carney talked about raising rates faster than expected, the pound popped (as one would expect) but it did not take even a few hours for it to completely reverse trend as if nothing happened, and the USD was back to being strong again. The speed of reversal was quite strange!
Crude oil prices are soaring back after getting smashed on last week’s stock market correction. Of course, all the selling in stocks and oil are not about what is happening now but what may or may not happen in the future.
Many are saying that U.S. oil prices are falling due to the projections for rising U.S. production. Predictions by the IEA and the EIA about a surge in oil suggest that U.S. oil production, which supposedly stands above 10 million barrels a day, will soon exceed 11 million barrels a day. Yet, the truth is that if demand growth stays at the rate we are currently at, then we will need that additional oil to meet global demand. Still, worries about global growth in recent days surrounding the stock market correction are causing some to think an oil demand slowdown is in store.