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Yesterday we provided an extensive preview of why there is a substantial risk the Fed will disappoint the market today when it fails to deliver a message as dovish as what the market now expects, both on the future of the Fed’s rate hike trajectory but more importantly on the future of the Fed’s balance sheet rolloff.

Picking up on what the Fed may or may not say in both its statement and during Powell’s press conference, Goldman writes that two issues will be the focus: guidance on the funds rate and guidance on the balance sheet. Here are the details.

Regarding the first, Guidance on the funds rate, Goldman writes that the December FOMC statement softened the sentence on future rate hikes by adding the word “some,” and by replacing “expects” with “judges,” to read, “The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with” its policy objectives. The December minutes further softened this language to “will most likely be consistent with,” and Goldman expects this change to carry over to the January statement.

Furthermore, recent speeches by Fed officials have emphasized that the Committee can be patient for now and that decisions about further changes in the policy stance are data dependent. Both themes will likely be incorporated into the statement by noting that the Committee will “patiently continue to monitor incoming data.”

Some market participants expect the Committee to go further and remove the current hiking bias from its statement altogether. This is not Goldman’s expectation, but it is possible.  The December minutes reported that “several” participants argued for the removal of the hiking bias at that meeting, and recent Fed commentary summarized in the Chatterbox has sometimes emphasized data dependence without indicating a continued hiking bias. A more dovish alternative to the baseline for the statement could fully emphasize data dependence with language such as “in making changes to the stance of policy, the Committee will be guided by the implications of incoming data for the economic outlook.”

Regarding the second, and arguably much more important, guidance on the Fed’s Balance Sheet, Goldman does not expect the FOMC to make formal changes to its plan for balance sheet runoff at the January meeting, though it could make changes at later meetings. Investors are focused on two potential changes:

• First, the FOMC could revise the June 2017 addendum to the Policy Normalization Principles and Plans, which currently says that “a material deterioration in the economic outlook” leading to “a sizable reduction” in the funds rate would be required to resume reinvestment before runoff has run its course. To Goldman, even a scenario of limited rate cuts alongside continued balance sheet reduction—using the two tools simultaneously but at cross purposes—seems unlikely, and the FOMC might eventually lower the bar for ending runoff in the event of a slowdown in the economy. However, Fed officials will likely worry that making such a change now would risk unintentionally suggesting that rate cuts are on the near-term agenda.
• Second, the FOMC could eventually taper its run-off by gradually reducing the monthly roll-off caps as the level of reserves approaches its longer-run level. The intent would be to reduce the risk of unintentionally shrinking the balance sheet past the point of reserve scarcity. The December minutes noted that some FOMC participants commented on this option at that meeting. While tapering is possible at some point this year, the minutes suggested this discussion is still in an early stage and it is unlikely that the Committee will make a change next week. Instead, Goldman expects Chairman Powell to simply reiterate at his press conference that balance sheet policy is flexible in principle. Fed officials have emphasized flexibility in their recent comments on balance sheet policy, but most have also said that they do not believe changes are currently needed.

In addition to the above revisions, Goldman also expects the Fed to make the following changes to its statement:

• Economic activity downgraded to “solid”: Available data since the December FOMC meeting point to a deceleration in growth. Many Fed officials have acknowledged the likelihood of slower growth in 2019, and several have also mentioned the negative impacts of the prolonged government shutdown, with New York Fed President John Williams saying it could “pull growth down by up to a half percentage [point], or maybe even a percentage point, if it continues.” We expect the statement to characterize
• economic activity as “solid,” compared to “strong” in December. However, with the lack of hard data due to the ongoing shutdown—and Goldman’s Q4 GDP tracking estimate of 2.5% still above potential—it is possible that the statement continues to characterize growth as “strong.” The statement will likely describe business fixed investment as having “increased moderately,” and to continue to describe growth in consumer spending as “strong.
• Unchanged labor market language: The statement will continue to describe job gains as “strong, on average, in recent months” following a 312k rise in payrolls in December. While the unemployment rate increased 0.16pp to 3.86% in December, the statement will continue to say that the unemployment rate “remained low,” consistent with the language used recently following similar changes.
• No change to inflation: Goldman’s economists expect no change in the statement’s inflation description. While inflation breakevens have come down, household inflation expectations as measured by the University of Michigan’s 5-10 year expectations increased to 2.6% in the most recent survey, matching a two-year high.
• No mention of government shutdown: Although several Fed officials have mentioned the negative growth implications of the shutdown, Goldman does not expect the statement to mention it. During the last prolonged shutdown in 2013, meeting transcripts show that then-Governor Powell argued against a proposed mention of the shutdown and the Fed ultimately did not include any mention in the statement.

Putting all of the above together, this is what Goldman believes the Fed’s statement (blacklined) will look like:

The revisions above are consistent with what Deutsche Bank economists also expect: they note that the most meaningful alteration will be to the forward guidance language. Indeed at the December meeting the statement noted that the “Committee judges that some further gradual increases” in rates would be consistent with the Fed’s dual mandate; here DB believes that this statement is now too strong given intermeeting developments and expect the language to be softened by noting that the Fed expect “further gradual adjustments” in policy will be consistent with the Fed’s objectives.

As for Powell’s press conference, Deutsche Bank economists expect a similar message to be reiterated with the unspoken takeaway likely to be that June is the earliest possible date for another rate increase. The balance sheet topic is likely to be a talking point although DB doesn’t expect any major announcements, which risks hurting dovish market sentiment.

via ZeroHedge News http://bit.ly/2Wv6Wrt Tyler Durden

Authored by Kai Weiss via The American Institute for Economic Research,

The Covington Catholic High School fiasco that has developed over the last weeks has shown more than ever why many are skeptical about the media these days. Facts and context — the reality on the ground — were put in the background in favor of a fable that confirmed a political allegory.

What is most shocking is that in today’s world, this is not an exception anymore. Much blame may be shifted to social media as a phenomenon that makes people feel safe in the anonymity of the online world and thus less inhibited than they would otherwise be. Still, the Covington Catholic saga is simply a symptom of a much bigger problem: the politicization of society — or, indeed, everything in life.

Needless to say, politicization is not new. But it feels as though, in today’s dramatically polarized climate, it is more extreme than in decades before. The Gillette ad, perhaps the only other “news story” that has garnered as much attention as Covington Catholic this year, is a prime example: regardless of what one thinks of it in the end, the question needs to be put forward why Gillette even thought it necessary to make a political statement in a commercial for razors. One needs to ask, to mention another example, why Ben & Jerry’s ever felt the need to launch a new ice creamnamed for “the Resistance.”

Consumed and Blinded

These days, it seems almost an impossibility to meet family and loved ones and not discuss Trump, Brexit, or the European elections. It seems unavoidable to be quickly judged by other humans not by your character but your political views. Everyone who is generally a Trump supporter has to be a fascist with whom one cannot interact anymore. Everyone who is generally a Democrat has to be a socialist or member of the elite with whom one cannot interact anymore.

Everyone is defined merely by one’s politics, by one’s party allegiance – whether one voted Republican or Democrat or Libertarian in the last election, or whether one was in favor of Brexit. Every issue is framed in these terms. A case in point for this is certainly also the Covington Catholic boys, who, for some reason, wore MAGA hats at a rally that was supposedly about preserving life. Again, a rally on principle developed into the sanctification of a great leader.

Why We Care

All of this is not to say that politics should not be important. Politics influences all of our lives in innumerable ways day in, day out. And as Micah Watson notes in a must-read essay, it is quite natural to be worried when your grandpa is voting Trump or your niece is feeling the Bern.

“True friendship,” Watson writes, depends “on a shared understanding of what is good.”

And when our neighbors endorse a significantly different political vision than we do, we intuitively sense that this is more than a mere disagreement about how to solve a problem, like two college roommates on a road trip bickering over the best way to get to spring break. This is a radical (to the root) disagreement about what counts as a problem in the first place.

Thus, “we should feel some sense of alienation when our friends and our neighbors endorse a position we find wrong or even abhorrent.”

But when people threaten children, call their relatives at the Thanksgiving table racist white supremacists or naïve libs who need to be owned, and when someone like Hillary Clinton goes so far as to say that Democrats “cannot be civil” anymore with Republicans, it may have gone too far. As Karl Salzmann writes, when the occupant of the White House becomes more central to the way we treat people than our views on “morality, virtue, and imagination,” this is a problem. Politics, then, may have become too important indeed.

This is a problem the great C.S. Lewis also saw when he mused that we should focus on “a household laughing together over a meal, or two friends talking over a pint of beer, or a man alone reading a book that interests him.” Meanwhile, “economies, politics, law, armies, and institutions, save insofar as they prolong and multiply such scenes, are a mere ploughing the sand and sowing the ocean, a meaningless vanity and vexation of the spirit. Collective activities are, of course, necessary, but this is the end to which they are necessary.”

So what is a possible way out of this conundrum? A multitude of proposals have been made to detoxicate today’s climate, and it would frankly be pretentious for me to claim to know the solution. Nonetheless, one surefire way, as friends of liberty will quickly point out, is to get politics out of our lives. As Kristian Niemietz notes, “The most obvious antidote to a dysfunctional, adversarial political culture is just to do less politics.”

What does that require? It necessitates a dramatic reduction in the size and scope of the state, the building of a wall between the state (so long as it exists) and the rest of our lives, and the restoration of the conviction that society works best when it is left alone. In other words, we need desperately to resurrect the vision of classical liberalism and draw lessons from its modern heirs in the libertarian tradition.

As John Stuart Mill summarized in 1869: “The modern conviction, the fruit of a thousand years of experience, is, that things in which the individual is the person directly interested, never go right but as they are left to his own discretion; and that any regulation of them by authority, except to protect the rights of others, is sure to be mischievous.”

While on the market and in radically decentralized systems, disagreements and polarization are not a problem, centralized political decision-making has in its nature that only one view can prevail. Suddenly, who is in the White House or whether regulation X or Y is passed does matter a great deal, and those with a different opinion than you on it may seem like actual enemies. Within voluntary settings, one can live with people that one disagrees with. All parties curate a way of life that works while living in peace with others.

To regain civility in human interactions and finally treat other human beings as human beings again, we would do well to get politics out of human affairs.

via ZeroHedge News http://bit.ly/2Ga20m1 Tyler Durden

Defectors from Venezuela’s army who are now loyal to self-declared president Juan Guaidó have called on the Trump administration to arm them in what they refer to as their quest for “freedom,” and are strongly opposed to the United States conducting a broad military intervention.

Two former soldiers, Carlos Guillen Martinez and Josue Hidalgo Azuaje, who live outside the country, told CNN they are in contact with hundreds of willing defectors who want US military assistance in their revolt against the Maduro regime. 

“As Venezuelan soldiers, we are making a request to the US to support us, in logistical terms, with communication, with weapons, so we can realize Venezuelan freedom,” Guillen Martinez told CNN. 

Hidalgo Azuaje said: “We’re not saying that we need only US support, but also Brazil, Colombia, Peru, all brother countries, that are against this dictatorship.”

The appeal came as US national security advisor John Bolton on Sunday warned the Maduro government that violence against Venezuela’s political opposition—or against its leader and self-declared president Juan Guaidó—would be met with stern reprisals.

Bolton also appealed to the Venezuelan military to assist in the smooth transition of power from Maduro to Guaidó, whom the US has recognized as the legitimate head of state.

American officials have repeatedly warned that no options are off the table, in terms of US intervention. –CNN

Over a dozen defectors who appeared in one recent broadcast say that devastating hyperinflation, food scarcity and economic malfeasance have many rank and file soldiers enraged. 

The soldiers say that despite their efforts, they are seeing limited success in inspiring a true military revolt. On January 21 a military unit was arrested after they rose up against the Maduro government. 

Martinez and Azuaje showed CNN their WhatsApp chat groups, which they say are connected to “thousands of angry junior officers and soldiers.” They claim to be working to bring several factions of disgruntled soldiers into a cohesive group. 

They flatly reject any suggestion of a broader US military intervention in support of Guaidó. “We do not want a foreign government [to] invade our country,” Hidalgo Azuaje said. “If we need an incursion, it has to be by Venezuelan soldiers who really want to free Venezuela.” –CNN

Guaidó has called for demonstrations this week, which the military defectors say they will use as an opportunity to pressure soldiers they know into similarly flipping their allegiance. 

“There are soldiers in every unit that are willing to rise up in arms,” one soldier told CNN in an underground parking lot in Caracas. “They are preparing themselves and learning from past mistakes. They are waiting for the right moment, so they can hit even harder that people feel it.”

The soldier said that some units have reported missing weapons and ammunition which they suspect may have been stockpiled by opposition supporters to help stoke an uprising. 

“Past operations have failed because the higher-ranking officers were against it. They still control every area, and if an uprising happens, it’s swiftly neutralized,” said the man, who acknowledged that the messages sent by defectors outside the country were “very positive” and “give us hope.” 

“They are outside Venezuela, but feed our soul. They inspire us and raise the military’s self-esteem.” 

Last week 

Venezuela’s top military attaché at the Washington D.C. Embassy, Colonel José Luis Silva, broke with the Maduro regime, urging other members of the Venezuelan armed forces to recognize Juan Guaidó as the legitimate interim president, according to the Miami Herald. 

“As the Venezuelan defense attaché in the United States, I do not recognize Mr. Nicolás Maduro as president of Venezuela,” Silva told el Nuevo Herald in a telephone interview from Washington. 

“My message to all armed forces members, to everyone who carries a gun, is to please let’s not attack the people. We are also part of the people, and we’ve had enough of supporting a government that has betrayed the most basic principles and sold itself to other countries,” he added. 

via ZeroHedge News http://bit.ly/2Se0ohD Tyler Durden

Today at 830am the Treasury Borrowing Advisory Committee (aka the TBAC, which many years ago we dubbed the Supercommittee That Really Runs America, an assessment which 8 years later Bloomberg now generally agrees with) “released minutes of its Jan. 29 meeting held at the Hay-Adams Hotel in conjunction with the U.S. government’s quarterly refunding announcement.

First, the highlights from the refunding announcement revealed no surprises, with the Treasury announcing no increase in nominal coupon or FRN auction sizes in the coming quarter, and expects TIPS issuance of $22-27BN this calendar year. Specifically, the Treasury will sell $38BN in 3 Year notes, unchanged from December, $27BN in 10 Year notes, unchanged from last quarter, and $19BN in 30 Year Bonds, also unchanged from last quarter.  In total, the Treasury will sell $84BN in long-term debt next week vs $83BN last quarter, in the process raising $29.9BN in new cash.

In this context, the TBAC recommended keeping nominal coupon auction sizes unchanged for the coming quarter, while gradually increasing TIPS by $1b per auction, with the increases starting with the 30Y TIPS in February, 5y TIPS in April and 10y increases to be considered subsequently. Following were dealers recommendations for coupon auction size increases: $1BN in 5y and 10y, $2BN in 30y, noted increases could be gradual and 30y could at first be increased by just $1BN. Primary dealers also suggested increasing TIPS issuance gradually, resulting in $24b increase over rest of CY2019; committee agreed increase should be gradual, with bulk coming from new October 5y security

The treasury also said that Bill supply will increase gradually and will start moderating in early-April, while confirming that extraordinary measures can be used after the March 1 debt ceiling deadline, while noting that it is too soon to say how long extra debt-cap moves will last.

On the topic of the government shutdown, the TBAC members discussed the expected end of debt limit suspension period on March 1st, 2019 and agreed with former Chair Matt Zames’ statement that, “The debt limit should not be seen as a budget tool. It is simply a limit on Treasury’s ability to borrow to pay obligations that have already been incurred by Congress during the budget process.” In addition, the Committee noted sensitivity from one ratings agency due to the recent government closure. Though current uncertainty on the duration of extraordinary measures is high due to data availability, given the expected cash balance on March 1, 2019 will be significantly higher than in 2017, preliminary street estimates expect exhaustion of those measures in the third quarter of 2019.

The TBAC also discussed the recent electronic inter-dealer broker market outage, noting that given the timing of the outage on a Friday afternoon, the impact on liquidity was muted. It was noted that had this happened in the morning, around an auction or key economic release, the impact would likely have been far greater.

The committee also said the Treasury needs to retain flexibility in issuance path, given uncertainty over fiscal projections and SOMA normalization; it also discussed the When Issued market and noted that volumes have likely decreased amid volatility and reduced dealer award shares; said though that length of WI period appears sufficient for price formation and liquidity

* * *

While all of the above was protocol, the most interesting part of the TBAC minutes was the discussion of the “unique challenges” faced by the Treasury over the medium term, especially the possibility of significant financing gap over next 10 years amounting to over $12 trillion and the potential need for more domestic investor participation if foreign reserve growth slows.

Specifically, the TBAC cautioned that the Treasury’s financing needs are expected to increase significantly even without factoring in recession possibilities over the next decade. Here, the TBAC warns that deficits to the tune of $1-$1.5trn a year, and  cumulatively over $12trn, over the next decade, are coming and will have to be funded in the bond market. Meanwhile, as noted recently, the CBO stubbornly refuses to forecast a recession in the next decade, instead projecting a steady 1.5-2% real GDP growth over the next 10y. While the TBAC did not take a position on this laughable assumption, it warned that deficits typically rise 2-5% of GDP in recessions, which would translate to additional deficits of $0.5-1trn at current GDP levels, and warns that “these borrowing needs have to financed in the context of already high global dollar debt exposure.”

But the bigger problem is that in the context of soaring deficit funding needs, the TBAC is worried that “foreign investors already hold significant dollar debt” which is why the US will have to increasingly rely on domestic savings to fund its future budget deficits.

The TBAC notes, tongue in cheek, that while the “USD is still the dominant reserve currency“, reserve managers have been very gradually increasing allocation to other currencies, and that the USD share of FX reserves has steadily come down from 72% in 2000 to 62% now. It also pointed out that other countries with significant debt issuance needs (as a share of GDP) depend far more on domestic savings. As a result, “the Treasury should plan to meet financing needs more domestically than in the recent past.”

Even more concerning, the TBAC notes, is that global FX reserves growth has stalled and global trade, as a share of world GDP, appears to have peaked, while underscoring what may be the most important transition in the global economy in decades, namely that China is now running a flat current account with the rest of the world, something we discussed extensively in “A Tectonic Shift In China’s Economy Has Largely Gone Unnoticed By Investors.“

As a result of these transformations, there has been an even lower official foreign demand for USTs, which has been evident in lower foreign bids at 2-5y Treasury auctions compared to longer tenor auctions. Furthermore, foreign holdings of marketable Treasuries, as % of outstanding, have declined meaningfully from the pre-crisis peak (from 55% in March 2009 to 41% currently)

And while the TBAC admits that Treasuries look far less attractive on a FX hedged basis, something we also discussed recently, which is likely contributing to this decline in foreign demand, the TBAC believes “the decline might be more secular in nature.”

As a result, in order to address both the soaring future US budget deficits as well as the declining foreign demand for US bonds, the TBAC recommends “a greater focus on domestically financing more of the borrowing needs through thematic issuances” as well as “exploring channels to increase foreign holdings of Treasuries.” And as part of its specific recommendations, the TBAC proposes the following products targeting specific savings pools to diversify the investor base:

• Financial institutions: Recommendation: explore further longer tenor FRNs issuance
• Life Insurance and Pension: Recommendation: explore further perpetual horizon, zero-coupon and 15-20y issuance
• Non financial businesses Recommendation: explore further healthcare/education inflation linked TIPS issuance

The TBAC also recommended several new bond type products, such as longer tenor (3Y and 5Y) FRNs, SOFR-linked FRNs, the issuance of 15 and 20 Year securities to “benefit from demand in the sector”, the issuance of “Perpetual Horizon debt” (noting that 14 OECD countries have issued ultra-long bonds with 40-100y maturities. Austria, Belgium and Ireland have issued 100y bonds in the past 2 years), and zero coupon issuance, but the most interesting recommendation: to launch a new product such as CPI subcomponent linked TIPS issuance, such as TIPS linked to healthcare and education CPI.

While there are no definitive answer to the very concerning questions brought up by the TBAC, keep a close eye on future TBAC presentations and especially any future reference by this all-important committee made up of the most important banks and hedge funds in the US…

… which appears to be increasingly concerned not only about how the US will fund its exploding debt deficits but also about the reserve currency status of the US Dollar.

The full TBAC presentation is below

via ZeroHedge News http://bit.ly/2B81Hos Tyler Durden

Rep. Alexandria Ocasio-Cortez says that Billionaires who want to run for president should work their way up – starting perhaps with city council. 

Referring to former Starbucks CEO Howard Schultz’s bid for President in 2020, the former bartender and Bernie Sanders 2016 organizer tweeted on Wednesday: “Why don’t people ever tell billionaires who want to run for President that they need to “work their way up” or that “maybe they should start with city council first”?” 

Why don’t people ever tell billionaires who want to run for President that they need to “work their way up” or that “maybe they should start with city council first”? https://t.co/3d8Nenrvl5

— Alexandria Ocasio-Cortez (@AOC) January 30, 2019

Ocasio-Cortez was referring to Schultz’s comment that she is the reason he’s running as an independent – a move widely seen by Democrats as ensuring a Trump victory in 2020. 

In a Monday interview with CNBC, Schultz called her proposal of a 70% tax on the rich un-American. 

“I respect the Democratic Party. I no longer feel affiliated because I don’t know their views represent the majority of Americans. I don’t think we want a 70 percent income tax in America.”

via ZeroHedge News http://bit.ly/2G9f4YQ Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

Wealth is flowing to those who earn money from their human capital and enterprise.

So you want to get rich: OK, what’s the plan? If you ask youngsters how to get rich, many will respond by listing the professions the media focuses on: entertainment, actors/actresses, pro athletes, and maybe a few lionized inventors or CEOs.

The media’s glorification of the few at the top of these sectors masks the statistical reality that those who attain wealth in these pursuits number in the hundreds or perhaps thousands, not in the millions. As in a lottery, the odds of joining such a limited group are extremely low.

There are 330 million Americans and 150 million people reporting income, so statistically, the odds of getting rich improve significantly if we focus on joining the ranks of the 11 million people who are getting rich from their human capital rather than on the few thousand people earning big bucks in music, film, sports, etc.

As I noted yesterday in The “Working Rich” Are Not Like You and Me, the nature of work and capital is changing. Markers that were once scarce–college degrees, for example– are now abundant, and have lost their scarcity value. What’s scarce isn’t credentials–what’s scarce are skills that generate productive problem-solving: human capital.

Work has been commoditized, that is, sliced and diced into processes that can be semi-automated or performed by workers anywhere in the globalized economy. Just as college degrees have been commoditized, so has the work the graduates are qualified to perform. The scarcity value of commoditized credentials and skills is low, and as a result, wages for commoditized work are low.

As noted yesterday, wealth is flowing to those who earn money from their human capital and enterprise: the income going to business owners dwarfs that going to the relative handful of highly paid CEOs or passive owners of stocks.

There are 11 million enterprise owners, and 1.1 million of these are reporting substantial incomes. These owners aren’t passively receiving dividends and interest; they’re running enterprises. When they retire or die, the profits of their company drop by 75%. It wasn’t the physical or financial capital they owned that was making the big money, it was their skills, values and experience.

I’ve described human and social capital at length in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.

It’s very tough to make money competing against global corporations and cartels, and so it’s no surprise that many of the most successful business owners are in sectors that place a premium on skilled labor, i.e. labor that cannot be completely automated or commoditized.

As the research mentioned yesterday explained, having control of how your income is taxed is extremely advantageous. Employees earning big money in states with high income tax rates may be paying almost half of much of their wages in taxes: 7.65% in Social Security and Medicare taxes, 32% or 35% federal taxes and state income taxes of around 10%. (The details are in yesterday’s post.)

Business owners can elect to pass through some of their income as profits, which are taxed at roughly half the rate of total taxes levied on wages (20% compared to 40%). That 20% reduction in tax burden adds up, and is a key reason why business owners get rich while high-wage employees struggle to get ahead.

There’s another advantageous strategy to getting rich that is not politically correct, so it must be mentioned in whispers: marry someone who is highly skilled, ambitious, thrifty, kind and who has productive values. Getting rich on one income is much more difficult than getting rich on two incomes, especially if the savvy couple lives on one income and invests the other income in their own high-skill enterprise.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print): Read the first section for free in PDF format.  My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.  If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

via ZeroHedge News http://bit.ly/2G1G5hE Tyler Durden

WTI prices are higher overnight following a smaller than expected crude build from API and ongoing concerns about Venezuela sanctions disrupting supply.

Bloomberg Intelligence Senior Energy Analyst Vince Piazza comments that:

Uncertainty over U.S.-China trade talks and Venezuela possibly declaring force majeure on its exports add to an already-clouded oil-market outlook. Refinery utilization has retreated while U.S. crude production remains resilient, and recent rig counts suggest a rekindling of activity.

Slowing demand, an ebbing global economic growth outlook and ample gasoline supplies inform our reserved stance on balances, despite OPEC’s compliance with capacity curbs. The cartel and its partners will need to extend curbs into 2H to support benchmarks.

API

• Crude +1.098 (+3mm exp)

• Cushing -682k (+100k exp)

• Gasoline +2.15mm (+2.4mm)

• Distillates +211k (-2mm exp)

API

• Crude +919k (+3.15mm exp)

• Cushing  (+100k exp)

• Gasoline -2.24mm 30

• (+2.4mm)

• Distillates  (-2mm exp)

After last week’s huge surprise crude build, expectations were for another big build but DOE reports a mere 919k rise in inventories (well below the +3.15mm exp). Additionally, gasoline stockpiles dropped for the first time since November, by the most since October…

 

Production flatlined Week over week at record highs.

U.S. Crude Imports from Saudi fall to the lowest since Oct. 2017

WTI traded just below $54 ahead of the DOE print and spiked above it on the small build…

“Geopolitics have returned with a bang,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “This latest attempt to tighten the financial noose on embattled President Maduro will further cement Venezuela’s supply outlook to the downside.”

via ZeroHedge News http://bit.ly/2DHSlSf Tyler Durden