Tag: news

Via S&P Global Platts Insights blog,

Demand destruction from the coronavirus outbreak will be top of mind for power and gas traders this week, while the ripples in the oil market are being felt in Saudi Arabia and Vietnam, albeit in different ways. The iron ore market, which is faring better, rounds out this week’s pick of commodity charts by S&P Global Platts news editors

1. Lockdowns in Europe, Asia push TTF gas price to 16-year low…

What’s happening? The coronavirus lockdowns in Europe and now India are hitting gas prices hard, with the TTF month-ahead falling to its lowest level since S&P Global Platts began assessments in 2004 of just Eur7.15/MWh. Reduced industrial activity in Europe has led to lower gas demand while declarations of force majeure by Indian LNG buyers mean deferred cargoes are likely to land on European shores.

What’s next? With the lockdowns likely to endure for weeks if not months, the bearish sentiment is not expected to lift, especially as maintenance work on gas fields and pipelines offshore Norway has been largely shelved on coronavirus fears. That means a market share battle between Norwegian gas, LNG and Russian supplies is set to intensify.

2. …and US sees power demand decline as coronavirus pandemic spreads 

What’s happening? New York City electricity loads have been weaker year-over-year this winter so far due to milder weather, but are now trending significantly below the recent five-year average, indicating a virus-related slowdown, according to Manan Ahuja, manager of North America power at Platts Analytics. These demand numbers could slow down even further as people stay home and businesses remain shuttered to prevent spreading the virus.

What’s next? US power system impacts from the coronavirus pandemic are beginning to emerge, with shifting load patterns, significant load declines in a number of areas and projections that mild weather and business shutdowns will continue to suppress load during the coming weeks.

3. Saudi Arabia poised for ramp-up in production, exports

What’s happening? Saudi Arabia has directed state oil company Aramco to supply 12.3 million b/d of crude to the market starting in April, once the OPEC+ accord expires. Aramco CEO Amin Nasser has said that 300,000 b/d of that amount will come out of the company’s inventories, leaving 12 million b/d to come from production. That is Aramco’s maximum production capacity, and Nasser has said the company can maintain that level of output for a year without any additional investment.

What’s next? Aramco, which has the exclusive right to pump all crude within the kingdom, has never produced that much before, and some analysts doubt its ability to sustain such high volumes. Aramco may also have difficulty finding enough buyers for its barrels, with many refineries cutting runs due to the coronavirus outbreak’s hit to gasoline and jet fuel demand. Countries seeking to fill up their strategic reserves may snatch up the barrels, but for commercial buyers, inventory costs are getting more expensive, especially for floating storage, amid a growing crunch in tank space availability.

4. Low prices to hurt Vietnam’s sweet crude output and sales

What’s happening? Vietnam, a major participant in Southeast Asian spot trade, is suffering from low global oil prices. Crude sales and export earnings for the country are estimated to fall by $225,000/day for every $1/b decline in outright prices. If prices are quoted at around $30–$35/b, state-run PetroVietnam said the company is likely to lose $3 billion in annual sales. Platts assessed Vietnam’s Bach Ho crude at record lows in March. The grade had an average outright price of $42.45/b to date this month, falling more than $25/b from $68.34/b on average in 2019, Platts data showed.

What’s next? The Southeast Asian sweet crude market may witness spot cargo volumes decline sharply as Vietnam scales back exports. PetroVietnam aims to produce 10.62 million mt of crude oil in 2020, down 18.9% from 13.09 million mt in 2019. Vietnam will pay more attention to building crude reserves than exports as low prices open new opportunities for PetroVietnam to stock up at lower costs, general director Le Manh Hung said. Building strategic reserves to ensure energy security is becoming more relevant to Vietnam as its import requirements have risen sharply in recent years, according to JY Lim, oil markets adviser at Platts Analytics.

5. Iron ore prices hold firm in face of lockdowns

What’s happening: Iron ore prices have held firm in recent weeks on supply side factors, even as steel prices have slumped on weaker demand as automotive and other industries have closed amid coronavirus-related curbs.

What’s next: Disruption to shipments due to 21-day lockdowns announced last week in South Africa and India – where iron ore exporters have declared force majeure – and new government directives from Canada may continue to support iron ore prices, offsetting the current collapse in European demand, which accounts for 9% of seaborne iron ore demand.

In a veritable treatise on all that was wrong with The Fed’s actions, Jim Grant – founder and editor of Grant’s Interest Rate Observer – was somehow allowed nine minutes on CNBC’s Squawk Box to put America straight on what we are facing and the consequences of these unelected and unaccountable officials terrifying experiments.

Grant began by slamming Jay Powell’s seemingly blinkered proclamation that “he sees no prospective consequences with regard the purchasing power of the dollar” as “very concerning” adding more pertinently that he thinks “that wilful ignorance is a clear-and-present-danger for creditors of The United States.“

It appears his fears are starting to be warranted as USA Sovereign credit risk is rising…

“I am in favor of life going on,” says Grant when asked by the anchor, “shouldn’t The Fed do something amid this massive global shutdown?”

The alternative, the venerable bond guru exclaims is the direction we are heading – “shutting everything down and putting the government in charge.”

Bernie Sanders may (or may not) be out of the presidential race but, as Grant highlights, “his programs are being implemented in fact daily.”

“One can die of despair as well as disease,” warned Grant, reminding viewers of the consequences of mass self-incarceration.

“There are health consequences to isolation, and health consequences to unemployment.. and life as it must go on is is a precious thing too and we ought to at least consider what we are condemning ourselves to if we choose to shut everything down for another month or two or three.”

“I think it would be a fatal error.”

Once again, the CNBC anchor urged Grant to support massive intervention but exclaiming “desperate times call for desperate measures.”

His retort shut down her argument quickly:

“experts are not expert in a dis-positive way, there is no certainty about this, just as there is no certainty in finance or indeed life,” and Grant adds ominously that “the cure is prospectively worse than the disease.”

“The delegation of political and economic authority to the US government to suppress this crisis is a clear and present danger.”

Finally, Grant, whose wife is a physician, reminded the anchors that the current actions (and consequences) have a direct analogy with the opioid crisis, as “in the early 2000s, the medical profession got it into its head that pain was the vital sign, and that no one ought to be in pain… this led to the deadly over-prescription of opioids.”

By the same token, Grant analogizes, “The Fed has intervened at ever-closer intervals to suppress the symptoms of misallocation of resources and the mis-pricing of credit. These radical interventions have become ever-more drastic and the ‘doctor-feel-goods’ of our central banks have worked to destroy the pricing mechanism in credit.”

Simply put, credit and equity markets “have become administered government-set indicators, rather than sensitive- and information-rich prices… and we are paying the price for that through the misallocation of resources.”

Grant ends on a hanging chad of a rhetorical question “what do corrections correct? Is there no salutary role for recessions and bear markets?”

Of course there is, he answers, “they separate the sound from the unsound, they separate the well-financed from the over-leveraged and if we never have these episodes of economic pain, we will be much the worse for it.”

Watch the full interview below:

With an unprecedented 66,000 coronavirus cases now reported in New York State, an emergency hospital was erected in tents in Central Park Sunday, as New York City’s staggering toll of coronavirus deaths rose to at least 776, pushing the statewide count past 1,000.

“We’re going to be using every place we need to use to help people,” Mayor Bill de Blasio said. “This is the kind of thing you will see now as this crisis develops and deepens.”

As SCMP reports, the emergency site will open at the park’s East Meadow on Tuesday and house 68 hospital beds for coronavirus patients, according to de Blasio. He said the Mount Sinai Health System, the faith-based charity Samaritan’s Purse – run by Franklin Graham, son of the late televangelist Billy Graham – the Central Park Conservancy and his own office were collaborating on the undertaking.

Graham put out a call for help on Twitter Sunday, and posted a video of workers building the tents to house the field hospital.
“If you are a Christian doctor, nurse, paramedic, or other medical professional interested in serving Covid-19 patients in our @SamaritansPurse Emergency Field Hospital in NYC, please visit http://samaritanspurse.org” he wrote. Samaritan’s Purse built a similar temporary facility in Italy to help deal with the crisis there.

If you are a Christian doctor, nurse, paramedic, or other medical professional interested in serving COVID-19 patients in our @SamaritansPurse Emergency Field Hospital in NYC, please visit https://t.co/EEw1jNtrrk. pic.twitter.com/5i7EeKxLDi

— Franklin Graham (@Franklin_Graham) March 29, 2020

As reported previously, US federal officials are also building an emergency 1,000-bed hospital at the Jacob Javits Convention Centre in Manhattan. The Army Corps of Engineers has also identified sites in Westchester County, home to the state’s first large cluster of coronavirus cases, and on Long Island for emergency hospitals.

The number of confirmed coronavirus cases rose 10.8 per cent during the same time span, from 29,158 to 32,308. Between 9:30am and 4:15pm Sunday, another 98 people died and 1,166 more people were diagnosed with Covid-19, bringing the number of dead to 776.

“It’s so painful for everyone that we’re going through this and we have to fight back with everything we’ve got,” de Blasio said. “Every death is painful. I feel a particular sense of loss when it’s one of our public servants.”

It took Spain 18 days to go from its first death to its 1,000th, according to data compiled by Johns Hopkins University. Italy took 21 days. New York state took 16 days.

New Yorkers are hearing a constant wail of sirens as weary ambulance crews respond to a record volume of 911 calls. New York medical staff are struggling with long hours and a dire need for hospital-grade masks and other protective gear.

The city’s ambulances are also responding to about 6,000 calls a day more than 50 per cent more than average. Fire Commissioner Daniel Nigro said Sunday that the last five days have been the busiest stretch in the history of the city’s EMS operation. “This is unprecedented,” de Blasio said. “We have never seen our EMS system get this many calls – ever.”

New York Governor Andrew Cuomo offered a faint glimmer of hope in the crisis, saying the rate at which new cases was doubling slowed to once every six days, down from once every other day earlier this month: “The doubling rate is slowing and that is good news, but the number of cases are still going up,” Cuomo said. “So you’re still going up towards an apex, but the rate of the doubling is slowing.”

Nevertheless, he extended the state’s “pause” order shuttering most businesses and urging New Yorkers to stay at home as much as possible.

New York State’s confirmed number of coronavirus cases reached 66,000 on Monday – roughly 7,000 new cases according to Cuomo’s office. That came as US President Donald Trump extended nationwide guidelines urging residents to stay home and avoid social gatherings to April 30, and as US health officials warned the country’s coronavirus death toll could top 200,000 people.

The USNS Comfort, a US Navy hospital ship with 1,000 beds, 12 operating rooms and a full medical staff, arrived in the city on Monday, much to Rachel Maddow’s dismay. It will be used to treat non-coronavirus patients to free up space in city hospitals.

This just might be the funniest thing you watch today.

Sorry this is happening to you @maddow pic.twitter.com/5hYLNRHSRW

— ALX 🇺🇸 (@alx) March 30, 2020

Submitted by Peter Garnry, Head of Equity Strategy, Saxo Bank

Summary:

The energy sector has lost extraordinarily $1.15trn in market value this year as oil prices have plunged to almost unimaginable levels.

In this equity update we provide investors with different ways to play the havoc in the energy sector. We also take a look at earnings this week with especially Carnival earnings being the most interesting to watch as the cruise industry is in a severe crisis due to COVID-19.

Lastly, we focus on consumer credit and the apparent weakness observed in China and how that could be a forewarning of what to come in the US and Europe. As a result we recommend investors to add Mastercard and American Express to their watchlists.

The global energy sector has been punched in the gut by first a slowing economy last year and then this year by an oil price war between Russia and Saudi Arabia. Making things worst the sector is now experiencing an abrupt 20% oil demand reduction equivalent to 20mn barrels a day or the entire consumption of the US. The oil futures curve is in steep contango as the active contract in Brent today went below $23/brl and stories have recently surfaced that physical oil is being transacted at $8/brl and oil storage is running out of capacity. As we talked about on our Market Call this morning the constraint on physical storage and ongoing demand destruction could push the front-end of oil futures down even further.

The current oil price creates extreme shareholder destruction with the MSCI World Energy Index losing $1.15trn in market value this year.

High yield bonds in the energy sector have seen their option adjusted yield spread to Treasuries widen to the highest levels on record and implied default probabilities are rising fast. But how should investors play the energy sector from here? One way is to buy call options on ETFs tracking the US or European oil and gas industry preferably with expiry during the second half. Another option is to get long-term exposure through single stock but here we recommend opting for only the highest quality names (see table below). The most risky strategy is to buy into those names that have the highest bankruptcy risk when the market rebounds, but here we recommend traders to apply some short-term filter (moving average or the like) to get confirmation during the rebound phase.

This week many Chinese companies will report earnings such as Geely Automobile and Air China, but also outside China interesting names such as Dollarama, Carnival, Walgreens Boots Alliance, CarMax, H&M and Constellation Brands will report earnings hopefully providing a picture of the demand situation in the US and Europe as these geographies are impacted by strict lockdowns due to COVID-19. With Carnival shares down 75% from this year’s peak in January and the trouble regarding many cruises during the last two months related to infected passengers with COVID-19 there will be a lot of focus on Carnival’s earnings. The main question is whether the cruise industry can stage a comeback and survive this serious threat to the industry.

In past couple of weeks we have highlighted many times on our Market Call podcast that investors and traders should watch oil, USD and VIX for guidance on market temperature. We have had focus on credit as well but with central banks stepping in the bleeding has stopped for now, but in other parts of the credit market outside corporate bonds there are now cracks happening.

Especially consumer credit in China is weaker as the weaker employment is spilling into repayment ability and is likely an indicator of what is coming for the US and Europe. So we recommend investors to put Mastercard and American Express on their watchlists.

In China loans to households have risen by 22% annualised and our worry is that at some point this credit expansion will lead to an abrupt halt like we saw in 2008 in the developed world.

Neel Kashkari, famous for coming out several days ago and giving one of the most bizarre 60 Minutes interviews of all time (an interview in which he claimed that the Fed had “infinite” cash) is now out giving life-lessons about when and how the American people should be worrying about moral hazard.

In an op-ed written late last week in the Washington Post, Kashkari made his argument that throwing as much money at the problem as possible, even if we don’t have a complete understanding of where that newly-printed cash is going, is the solution.

In other words, we’ve got the cash and so now, we can be the moral authority as well.

Kashkari stated: “If there is a principle policy makers need to keep in mind going forward, it’s this: Err on the side of helping as many workers and businesses as possible rather than on prudence. This is not the time to worry about moral hazard or whether people are incentivized not to work.”

He continued: “When the Covid-19 crisis is behind us, if our biggest complaint is that some workers and small businesses got help when they didn’t really need it, that would be a wonderful outcome for our country.”

Kashkari seemed to make the argument that since the Fed was already printing unlimited amounts of cash, they might as well use it to shore up as many liabilities that existed prior to the crisis anyway: “Policy makers should use the full authority Congress grants to immediately make sure that states have the health-care resources and equipment they need, that businesses have the wherewithal to preserve their staffs, and that individuals and families can make ends meet until the virus is contained”

“The highest priorities must be to enable the health-care system to catch up and control the spread of the virus — and to maximize the number of jobs saved. It is far better to spend taxpayer money to help small businesses retain their workers than to spend the same money helping workers after they’ve been laid off,” he continued.

Recall, during Kashkari’s 60 Minutes interview a week ago, Kashkari, when asked if the Fed would just “literally print money”, admitted: 

“That’s literally what congress has told us to do. That’s the authority they have given us, to print money and provide liquidity into the financial system. We create it electronically and we can also print it, with the Treasury Department, so you can get money out of your ATMs.”

Kashkari’s God complex continued when he was asked: “Can you characterize everything the Fed has done this past week as essentially flooding the system with money?” 

To which Kashkari responded simply: “Yes. There’s no end to our ability to do that.”

Gov. Andrew Cuomo is delivering his latest press briefing…NY’s case count has climbed by 6,894 cases to 66,497…

At the Javits Center in New York City giving a briefing on #Coronavirus. WATCH: https://t.co/Zx7b6P8wag

— Andrew Cuomo (@NYGovCuomo) March 30, 2020