Stymied oil futures were stopped in their bullish tracks after President Trump tweeted that:
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business”.
This came despite desperate pleas from Fed Chairman Jerome Powell that warned of devastating recessionary consequences if a bill did not pass. The breakdown in negotiations led to a breakdown in stocks and oil that had rallied on rising gasoline demand as well concerns about production shutdown in the Gulf Of Mexico because of Hurricane Delta.
The crude oil market also lost more ground after the American Petroleum Institute report showed a surprise increase in crude oil supply. While the increase of 951,000 barrels was modest, it did not help a market that was already damaged by the tweet. Still, more focus on the tightening gasoline situation as the API reported a 867,000 barrel draw. RBOB is the spot that could cause a squeeze up in prices. Distillates also fell by 1.033 million barrels.
Yet could some overnight tweets save the markets? President Trump tweeted that:
“The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!
Later he tweeted that he was “ready to sign” a “Stand Alone Bill for Stimulus Checks ($1,200). Are you listening, Nancy?
Federal Reserve Chairman Jerome Powell was listening. He wants a bill now.
“The expansion is still far from complete, at this early stage; I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship.”
Mr. Powell said a broader measure of joblessness that better accounts for current conditions, including a large drop in the share of Americans looking for work and greater difficulty characterizing job status due to pandemic-related furloughs, suggested a more realistic measure of unemployment is running around 11%. Second, a prolonged slowdown in the pace of improvement could trigger “typical recessionary dynamics, as weakness feeds on weakness.”
Hurricane Delta is having an impact on oil prices as well. Yesterday oil rallied as the Bureau of Safety and Environmental Enforcement “BSEE” reported, “That 29.22 percent of Gulf of Mexico oil production was shut as well as 8.59 percent of natural gas production. More will come off today. According to the US Energy Information Administration, the offshore Gulf of Mexico is home to roughly 1.9 million b/d of crude production capacity.
Yet while the storm could be a significant problem, natural gas is getting a bounce because Delta hit Mexico. It did not hit it with force expected, having the market price faster bounce back for electricity and demand.
S&P Platts reports that:
“Shell said it is evacuating some staff from all of its Gulf facilities. As a precautionary measure, Shell (LON:RDSa) is preparing to shut down production at several assets and has begun evacuating non-essential personnel from all nine of its assets in the Gulf of Mexico,”
Shell said in an October 6 statement. “All drilling rigs are securing operations.”
Norway’s Equinor is in the process of evacuating crews from its Titan platform, company spokesman Erik Haaland said in an email October 6. “We expect that Titan will be fully evacuated and shut down by Tuesday,” Haaland said. Chevron (NYSE:CVX) has begun evacuating crews and shutting in production, the major said late in an Oct. 5 bulletin.
BP (NYSE:BP) said Oct. 5 it had begun securing offshore facilities and evacuating non-essential crews from its four offshore platforms: Thunder Horse, Atlantis, Mad Dog and Na Kiki.
BHP (NYSE:BHP) was doing likewise at its operated Shenzi and Neptune platforms, company spokeswoman Judy Dane said, adding BHP plans to be fully evacuated and the platforms shut-in by Oct. 7. Occidental Petroleum (NYSE:OXY) said it is closely tracking the storm.
We still believe oil is at a seasonal low. Look to hedge and put on bullish strategies.