Crude oil prices are getting a wake-up call after a lowering of the U.S. oil production outlook--a report of a major drop in U.S. oil supply and a warning by S&P to oil majors cut to back more and reduce debt levels or face downgrades.
For the first time in history, the globe has invested more money in electricity than crude oil, according to the International Energy Agency (IEA); and while that may seem to inspire thoughts of electric cars and cheap shale oil, the truth is it's a problem we will have to deal with at some point in the future. The IEA issued a warning that because of a 20% drop in global energy investment over the past three years, we are laying the groundwork for oil and electricity shortages in the future.
It appears that equity markets have taken inspiration from the performance of the financial market at the conclusion of last week, with Asian stocks trading broadly higher and European shares looking positive at the time of writing.
The U.S. dollar is higher against most major pairs after a jobs report that added more than 200,000 positions. The Canadian dollar was the outlier making gains against the greenback on the back of a similar strong jobs report that validates the hawkish comments from the Bank of Canada in the last three weeks.
Believe it or not the globe is headed for an oil shortage. I know many find that hard to believe, especially in this shale-crazed world where there is the belief that shale oil will fill all voids, even as investment in oil exploration falls to the lowest level since the 1940s.
As the G20 Summit gets underway, market participants will pay close attention to the results from the first meeting between Pres. Donald Trump and Russia's Vladimir Putin. Global leaders are expected to comment on a myriad of topics that include North Korea and International Trade.
Rising yields and rising oil production is causing oil to plunge even as U.S. oil stockpiles drawdown at a record rate. The rebound in U.S. oil production of 88,000 barrels a day according to the weekly Energy Information Administration and was the key data factor that is causing the selloff. The market says that the 100,000 barrel drop in U.S. oil production was just a storm-related fluke and that U.S. oil production will continue to rise even as many producers at this price level will struggle financially.
As we enter the business end of the week, the United States will be in focus with a large number of data scheduled to be released including some important labor market numbers and surveys on the services sector.