The per-barrel price for West Texas Intermediate (WTI) crude oil slipped by about a dollar in Monday’s futures market to around $52.90. A continuing rise in U.S. drilling rigs and massive sales of stored Iranian oil are responsible for the downturn.
For most of 2016, Iran had about 29.6 million barrels of crude stored on tankers sailing in circles in the Persian Gulf. Since October, Iran has reduced that total to around 16.4 million barrels, according to a report from Reuters. Those 13 million barrels have been sold to China, India, South Korea and European buyers including France and Italy, among others.
Because Iran is exempt from the recently implemented cuts to OPEC production, Iran could continue to produce around 4 million barrels a day and also continue to sell from its floating storage inventory. That undercuts the 1.2 million barrels a day that OPEC has agreed to cut from production for the first six months of 2017.
Iraq, too, has been boosting sales. In December the country exported a record 3.51 million barrels a day from the port of Basra. The Iraqi government has said, however, that it will reduce production by an average of 210,000 barrels a day beginning this month.
We noted in early December that the agreed cuts from OPEC were cuts to production and did not include exports from existing crude inventories.
In the United States, the rig count last week was higher than it has been since mid-December of 2015. U.S. production has reached 8.8 million barrels a day since its low point last summer, but it remains about 9% below its 2015 peak.
While this all contributes to Monday’s slide in crude prices, the month-end data on production from OPEC and other countries that have agreed to cut production will have a more decided impact on prices. The other weight on crude prices is the strengthening U.S. dollar. Because oil is traded in dollars, as the greenback gets stronger crude prices dip
TRUMP ATTACKS REGS
President Donald Trump signed an order on Monday that will seek to dramatically pare back federal regulations by requiring agencies to cut two existing regulations for every new rule introduced.
"This will be the biggest such act that our country has ever seen. There will be regulation, there will be control, but it will be normalized control," Trump said as he signed the order in the Oval Office, surrounded by a group of small business owners.
Trump's latest executive action will prepare a process for the White House to set an annual cap on the cost of new regulations, a senior official told reporters ahead of the signing.
For the rest of fiscal 2017, the cap will require that the cost of any additional regulations be completely offset by undoing existing rules, the official said on customary condition of anonymity.
Trump, a businessman turned politician, campaigned on a promise to reduce federal regulations that he said burdened American businesses.
Major regulations are typically reviewed by the White House's Office of Management and Budget (OMB) before they are issued. That review will continue under this new measure, but agencies will also have to identify what two regulations will be repealed to offset the costs of any new rule.
The new order does not require that the repeal of the two regulations be done simultaneously with the release of additional rules, the official said.
"This vests tremendous power and responsibility in the OMB director to ensure the president's direction in how we manage this across the government," the official said.
Certain categories of regulations will be exempt from this new policy, including those dealing with the military and national security. The OMB director will also have the ability to waive this policy in certain instances.
Trump has tapped U.S. Representative Mick Mulvaney of South Carolina to lead the OMB.
Goldman Sachs Group Inc said Gary Cohn will receive more than $100 million of stock and cash that would other wise have been locked up for years as he leaves the Wall Street firm for a role in the Trump Administration. Goldman said in a filing Tuesday that it had made available immediately Mr Cohn's outstanding stock awards and long term bonuses accumulated over his 25 years at the bank, many of which he spent as heir apparent to Chief Executive Lloyd Blankfein. Mr Cohn received $65 million in cash to cov er his potential future bonuses at the bank, according to the filing. Those payouts would otherwise have been determined by how Goldman fared over the next several years. He also received $45 million worth of stock that was locked up or remained subject to clawback. He must now sell those shares to comply with government ethics rules. Mr Cohn will be able to defer taxes on the profits from the sale of his Goldman stock, though he will owe taxes on some of the shares delivered. Mr Cohn earned a 2016 pay package valued at $20 million, down 5% from a year earlier.
GOLDMAN SACHS $100 MILLION TO LEAVE
PESO IS DROPPING
The flow of migrants to Europe and other wealthy destinations will not abate. It will intensify in years ahead as relatively young emigrants depart from poorer countries in Africa and Southeast Asia to places with better opportunities. The gap between rich and poor countries that has enticed people from the Middle East and Africa to cross the Mediterranean will not close much during the next few decades. North Africa will remain a source of migrants looking to resettle in Europe. Scarcity of food and water, political upheaval and ethnic conflict will afflict Africa and the Middle East for the forseeable future, prompting waves of migration. Seveal Asian nations can expect more migrants as their economies prosper. South Korea Malaysia and Singapore for instance will turn into popular destinations
Developed countries will struggle to limit or block the influx of newcomers. Advanced technologies will be deployed to monitor borders, drones, motion detectors and other surveillance devices. Determined entrants will find creative ways past them. Defusing geopolitical crisis overseas could prove a more effective way to cope with the problem of displaced people seeking new homes For Europe and America, trying to find ways to tamp down armed conflict and promote economic development in unstable countries figures to be long term, thorny problem in the 21st century.
NATURAL GAS INVENTORIES DROP
WHERE IS APPLE HEADED
Certified Public Accountants FAX 732-516-9778
328 Amboy Ave, Metuchen NJ 08840
PRICE OF OIL SLIDES
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 151 billion cubic feet for the week ending January 6. Analysts were expecting a storage decline of around 144 billion cubic feet. The five-year average for the week is a withdrawal of around 167 billion cubic feet, and last year’s storage decline for the week totaled 168 billion cubic feet. Natural gas inventories fell by just 49 billion cubic feet in the week ending December 30.
Natural gas futures for February delivery traded up by about 3.8% in advance of the EIA’s report, at around $3.35 per million BTUs, and traded around $3.45 immediately after the data release. Natural gas closed at $3.22 per million BTUs on Wednesday, after falling from a high of $3.36 last Friday. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.81.
Natural gas prices remained low over the past week as warmer weather moved through the middle of the country toward the east coast. Cold weather over the northern tier boosted consumption above the consensus estimate, but still below the five-year average and last year’s consumption. Continued warmer weather east of the Mississippi should keep prices in check again during the next week.
Stockpiles have now dropped to 10.3% below their levels of a year ago, and just 0.1% below the five-year average.The EIA reported that U.S. working stocks of natural gas totaled about 3.160 trillion cubic feet, around 4 billion cubic feet below the five-year average of 3.164 trillion cubic feet and 363 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.523 trillion cubic feet for the same period a year ago.
Here’s how share prices of the largest U.S. natural gas producers reacted this report:
Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down about 0.5%, at $86.34 in a 52-week range of $71.55 to $95.55.
Chesapeake Energy Corp. (NYSE: CHK) traded down about 0.2% to $6.91. The stock’s 52-week range is $1.50 to $8.20.
EOG Resources Inc. (NYSE: EOG) traded up about 1.1% at $105.85. The 52-week range is $57.15 to $109.37.
Also, the United States Natural Gas ETF (NYSEMKT: UNG) traded up about 4.2% at $8.53 in a 52-week range of $5.78 to $9.74.
THE ECONOMY SLOWS
GOAL IS SMOOTH
Apple Inc. (NASDAQ: AAPL) is scheduled to report its fiscal first-quarter financial results on Tuesday after the markets close. The consensus estimates from Thomson Reuters call for $3.22 in earnings per share (EPS) and $77.38 billion in revenue. In the same period of last year, the consumer electronics giant posted EPS of $3.28 and $75.87 billion in revenue.Apple is among the most visible and popular brands in the world. It has become so large that it is the largest nongovernmental company, and it has a cash trove that is larger than the treasuries of most nations.
Despite all the positive sentiment that most analysts have surrounding Apple, one issued a call that was not in line with the general consensus. Earlier this month, Barclays downgraded Apple to an Equal Weight rating from Overweight and lowered the price target to $117 from $119. The good news here for the Apple bulls is that this downgrade has a lot of a valuation ring to it, even if some fundamental issues were brought up.
There is a fear that iPhone sales will prove to be lackluster during this year. Barclays also pointed to the lack of major issues to move the needle in 2017. What is really being said here, particularly in light of such a close analyst target price, is that Apple is going to be dead money. Not all analysts agree with Barclays, but some other recent analyst calls express some of the same concerns.
Prior to the release of the earnings report, a fair number of other analysts weighed in on Apple:
Bernstein reiterated an Outperform rating.
Credit Suisse reiterated an Outperform rating with a $150 price target.
Piper Jaffray reiterated an Overweight rating with a $155 price target.
JPMorgan also reiterated an Overweight rating.
RBC Capital Markets reiterated an Outperform rating with a $125 target.
Baird reiterated an Outperform rating with a $133 price target.
Cowen reiterated an Outperform rating.
Macquarie has an Outperform rating with a $148 price target.
Merrill Lynch has a Buy rating with a $140 price target.
Morgan Stanley reiterated an Overweight rating with a $148 price target.
Goldman Sachs reiterated a Buy rating with a $133 price target.
So far in 2017, Apple has outperformed the broad markets, with the stock up 5.3%. Over the past 52-weeks, the stock is up nearly 30%.
Shares of Apple closed Friday at $121.95, with a consensus analyst price target of $133.40 and a 52-week trading range of $89.47 to $122.44.
The U.S. economy’s expansion slowed in the fourth quarter, and annual growth failed to reach 3% for an 11th straight year, reflecting the huge hurdles the Trump administration faces in trying to speed up a 7½-year-old expansion.Gross domestic product, the official score card for the economy, expanded at a 1.9% annual clip from October to December, the Commerce Department said. That’s a marked drop from a 3.5% growth rate in the third quarter and below the 2.2% MarketWatch-compiled consensus.
In early trading, the Dow Jones Industrial Average DJIA, -0.12% was little changed. The Dow finished at a record high Thursday, however, and is now up 25% over the last 52 weeks.For the full year, the U.S. grew just 1.6%, compared with its 2.6% clip in 2015. It was the weakest performance since 2011. The last time the U.S. topped 3% growth — the historical average is 3.3% — was in 2005.President Donald Trump has vowed to push the economy into higher gear with an aggressive combination of tax cuts, reduced regulations and more government spending on public works. Yet economists say it will take time before the U.S. reaps any benefits.Most predict the economy will grow around 2% or a bit faster in 2017. If Trump’s approach works, the payoff is unlikely to come until the end of the year or early 2018, they say.The U.S. economy was in decent, if unspectacular, shape at the end of 2016,” said Gus Faucher, senior economist at PNC Financial Services.
Inside the report
A wider trade deficit — a negative for GDP — was by far the biggest anchor in the fourth quarter. The economy would have topped 3% growth if the trade gap has basically been unchanged.Other key bulwarks of the economy, such as consumer spending and business investment, showed an underlying resilience that kept growth on a steady path.Consumers, the torchbearers for the U.S. economy, increased spending by a solid 2.5%. They were especially gung-ho on big-ticket items such as new cars and computers. Outlays on long-lasting or durable goods leaped almost 11%.Businesses also ratcheted up overall spending, including the first increase in equipment purchases in five quarters. Similarly, builders boosted investment in new housing by just over 10%, marking the first advance in three quarters.
Companies also stocked up more. The value of inventories jumped by $48.7 billion after barely any change in the spring and fall.
Firms are replenishing warehouse shelves after drawing down inventories in the first half of 2016 to alleviate an excessive buildup. The cutback in production last year helped constrain the economy.Trade has been another major drag on the U.S. owing to a soft global economy and a stronger dollar that made American exports more expensive. In the fourth quarter, exports sagged 4.3%.Yet imports sizzled 8.3%, a reflection of a stronger U.S. economy as compared with the rest of the world. That’s the biggest gain in imports in two years and shows Americans are still willing spenders.Part of the steeper trade deficit at the end of 2016, what’s more, reflected a big drop in soybean exports after a surge in the third quarter tied to a poor harvest in South America. The bonanza in soybean exports in the fall gave a boost to third-quarter GDP.
What remains to be seen is whether a tougher approach by a new administration hurts trade and offsets the benefits of pro-growth domestic policies. Trump has threatened a tax on Mexican imports if the country refuses to pay for the construction of a border wall along the U.S. border.Inflation, meanwhile, rose at a 2.2% annual pace in the fourth quarter, according to the PCE price index, the preferred gauge of the Federal Reserve. That’s the highest level since 2012.The PCE has been closer to 1% for much of the past two years. If inflation picks up any further, it could spur the Fed to raise interest rates more aggressively in 2017 than the bank has so far signaled.
Twitter diplomacy just ripped the Mexican peso, again.
At its low, the currency was down more than a percent against the U.S. dollar after Mexican President Enrique Pena Nieto canceled a meeting with President Donald Trump, in a dispute over Trump's border wall. It later reversed some of the losses.Pena Nieto was expected to visit the U.S. next week to discuss immigration and trade issues, and Mexican officials have been meeting with the Trump administration ahead of time. Though Trump seemed to make conciliatory comments about Mexico on Wednesday, the president reversed that sentiment by tweeting Thursdaythat the meeting should be canceled if Mexico won't agree to pay for the wall.
The Mexican president tweeted back, in Spanish, that he informed the White House that he would not be attending the meeting. White House spokesman Sean Spicer later said that the wall could be paid for with a 20 percent tax on all imports from Mexico, but the White House later backtracked and said the 20 percent tax was just an example of what could be done.
Market trying to push Mexican peso lower: Union Group Wednesday, 25 Jan 2017 | 1:09 AM ET | 03:50
Trump signed two executive orders Wednesday aimed at cracking down on immigration, including a directive to build the wall. A barrier along the southern U.S. border was a key promise made by Trump during his campaign, and Mexican officials have repeatedly said they will not pay for it.After Pena Nieto's tweet, the dollar moved higher against the Mexican currency. Dollar/peso rose to 21.30, after hitting 20.86 earlier in the day. The peso was down 1.1 percent against the dollar at midday but it recovered about a half percent in afternoon trading. The low for the peso was when it reached 22.0385 to the dollar on Jan. 11.
"Yesterday's conciliatory tone has been shattered by those tweets," said Andres Jaime, global foreign exchange and rates strategist at Barclays. "It's a reversal from yesterday's optimism that this was going to go smoother than initially thought. ... In the meantime, [the peso is] going to remain under pressure."The talk of border tariffs reinforces the negative outlook for the peso, for now, said Win Thin, senior currency analyst at Brown Brothers Harriman."The market has gotten a little more balance, but I think it's (dollar) loaded for another move higher," said Thin. "I'm kind of confident that the dollar is going to head higher and I'm very confident we're going to have gyrations both ways...I still think things are negative for Mexico and nothing's changed. Tariffs are never good."
The peso recovered a bit after Spicer discussed a tax on Mexican imports but was still lower on the day. Jaime said he estimates the market is already pricing in a border tax, at about 16 percent, at current levels. "In our assumption expectations about Trump policy would imply a border tax of about 16 percent," Jaime said.Jaime said he doesn't see the peso going much lower than it went in January, but he does expect it to be more volatile. He projects it to trade flat this year, but the risk would be more to the upside, because of the deep slide in the peso already.The U.S. has a huge trade deficit of $60 billion with Mexico, but it's very different, the relationship the U.S. has with Mexico than it has with China.
The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers...to tell the people, 'look, I'm doing what I promised,'" Jamie said. "We need to get used to this very high intraday volatility."
Markets had been looking forward to the meeting as the next event that could affect the peso, but now there's no event — other than tweets, which aren't predictable. "What we've seen, in terms of policy announcements, is many times you can see a tweet changes the perception of the market," he said.The U.S. trade deficit with Mexico was about $58 billion in the first 11 months of 2016. It was $58 billion for all of 2015, according to Commerce Department data. The deficit was the largest in 2007, at $74.8 billion.According to the Office of the U.S. Trade Representative, Mexico was the third-largest supplier of goods imported into the U.S. in 2015. The top category was vehicles, including parts at $74 billion. The U.S. also imports electrical machinery, mineral fuels, and optical and medical equipment. The U.S. imported $21 billion in agricultural products in 2015.