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Energy & Equity Markets Are Sliding

Monday, Jan 28 2019
Market Talk

Energy & Equity markets are sliding Monday morning, after a sigh-of-relief rally Friday when the US Government reopened temporarily, proved to be short lived. For petroleum contracts, this sell-off pulls prices well away from the December highs they were threatening last week, and the failure to break out leaves us in technical limbo.

This is scheduled to be a busy week for headlines with quarterly earnings reports coming out, a FED meeting, along with more Brexit & Chinese trade talks. For the energy markets this very well may mean more back and forth trading as there appears to be a lack of conviction in either direction.

Baker Hughes reported an increase of 10 oil rigs working in the US last week, reversing a 3 week trend of rig count declines. Perhaps more interesting is that while Texas led the rig count charge in 2018, the lone star state has seen its drilling activity slow for the past 3 weeks, while North Dakota and New Mexico have been increasing over that span, and accounted for the majority of last week’s increase.

We haven’t seen a CFTC commitments of traders report since the week of December 18 due to the government shutdown, but if you make an inference based on what ICE reports on Brent, not to mention the strong price rally to begin 2019, it’s safe to say the speculators are dipping their toes back in the water, with open interest and managed money net length both increasing for a 3rd week.

Today’s interesting read has a lot to do with the activity of those speculative funds: Dr. Philip Verlager explains why projections for increased oil production from shale may be overestimated due to cash flow concerns.

Today’s not-so-interesting read: The EIA’s report on US distillate consumption in 2017. Not only is the data going on 2 years old, the report offers little insight into the drivers of consumption trends.

CLICK HERE for a PDF of today's charts

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