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Old September 8th, 2017, 10:16 AM
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Energies Report-Apocalypse Now. The Energy Report 09/08/17

Everywhere you turn natural disasters and threats of more to come make it feel like the end of the world. Not only do we have to deal with three major hurricanes Irma, Jose and Katia in the Atlantic, now a massive earthquake in Mexico overnight has caused death and destruction. There is also rising nuclear tensions with North Korea that is causing the market to seek safety and wait for that proverbial shoe to drop next.

There are reports of at least five dead after an 8.1 magnitude earthquake and a tsunami that struck the southern coast of Mexico early Friday, prompting tsunami waves in the country that measured up to 2.3 feet and warning to the Pacific coasts of several Central American countries, including Guatemala, El Salvador, Costa Rica, Nicaragua, Panama and Honduras.

The National Hurricane Center is warning that Hurricane Irma remains, “an extremely dangerous” category 4 hurricane with 155 mph winds. The NHC storm track map shows Irma is set to hit Florida on Saturday night before tracking up towards Georgia, Tennessee and South Carolina. That is unwelcome news.

The dollar has gone into deep retreat as the market worries about North Korea tensions and after ECB Chief Mario Draghi made comments that the ECB may move to cut back on quantitative easing in October while US Fed officials suggest that they may slow their trajectory of interest rate increases. The dollar weakness is also reflecting the potential hit on the US economy as it prepares to take a hit from Hurricane Irma just after the hit from Hurricane Harvey and perhaps another shot from Hurricane Jose. The Mexican Peso is also taking a hit as Hurricane Katia will hit land and the fallout from this massive earthquake that may impact their economy as well.

That, along with the risk on, end of the world as we know it feelings, is leading to a breakout move higher for gold, silver and platinum. Orange Juice prices rose almost 4% as this may be the final blow for many Florida orange juice growers as they may just give up after this storm. Florida orange juice growers have fought falling demand for their product as well as crop disease.

Energy prices are in an eerie calm. Gas prices fell on fears of demand destruction. Brent crude is surging versus WTI as EU refiners demand crude. Natural gas is flat awaiting to see how bad the destruction is.

The UPI reported that, “The value of the U.S. dollar is having more of an impact on oil markets than the OPEC effort to trim production, the head of Russian oil company Rosneft said. The value of the greenback has moved steadily lower when weighed against the euro since U.S. President Donald Trump took office. A briefing from currency trader XE said Friday the dollar is under pressure from hurricane threats to the U.S. mainland and geopolitical tensions with North Korea, U.S. economic policy notwithstanding.*The value of the dollar influences internationally traded commodities like gold and crude oil. When the value falls, commodity prices increase because more dollars are required to purchase the same quantity as when the value was higher.”

Igor Sechin, the head of Russian oil producer Rosneft, said a decline in the value of the U.S. dollar was having a greater market impact than the effort by the Organization of Petroleum Exporting Countries to balance the market with coordinated production declines. Russia is a party to the effort and is cutting the most among non-OPEC members.*“The Americans are supporting their shale producers through the dollar’s devaluation. I think that the effect of the dollar’s devaluation is stronger than the OPEC deal,” he told Russian news agency TASS.

The value of the U.S. currency has moved lower for much of the year. The price for Brent crude oil, meanwhile, is about 10 percent higher than on this date in 2016 at $54.68 per barrel.

U.S. shale oil operators, meanwhile, have become more efficient and able to produce more despite the historic low for crude oil prices, which were above $100 per barrel three years ago. The four-week average for total U.S. crude oil production is 9.3 million barrels per day, up 9.5 percent from the same period last year.*The value of the dollar would influence the market price and U.S. exports over the same four-week period are up 12.3 percent. Brent crude oil, the global benchmark for the price of oil, holds a $5.80 per barrel premium over West Texas Intermediate, the U.S. benchmark for the price of oil.

Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in response to emailed questions that, “Trump supported a strong dollar on the campaign trail, but appears to favor a weaker currency as president in order to support U.S. exports.” “The Russian are probably not happy the dollar is weak and giving us that edge in exports,” he said. Flynn added, however, that Sechin’s case “is very thin.”

When it was implemented in January, the OPEC-led effort was seen as helping to establish a $50 per barrel floor under the price of Brent.*Sechin added that not all of the OPEC members are participating in the effort. Libya and Nigeria are exempt from the deal so they can steer oil revenue toward national security efforts. A pending initial public offering for the Saudi Arabian Oil Co., known also as Saudi Aramco, could be a major factor for the price of oil. The IPO would make the company more interested in pushing for a higher price of oil, he said.

Prays for all impacted by storm.
Phil Flynn
Questions? Ask Phil Flynn today at 312-264-4364

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Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.

The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017

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