Paris Attacks
Oil prices rebounded on reports of a drop in supply and also gained support as Paris police battled overnight to try and capture those responsible for the murders in the recent terrorist attack.
An early morning raid on an apartment just outside of Paris believed to be where the alleged “terror mastermind” Abdelhamid Abaaoud, a Belgian of Moroccan origin, was believed to be. While early reports are saying some of the suspects were killed, it is unclear whether Abaaoud is among the dead. We do know that some Paris police were injured after a woman wearing a suicide belt blew herself up after shutting off an AK-47 riffle. The AP reported that at least seven explosions heard during the standoff and it is reported that three suspects were taken into custody while 2 others died.
Yet terror is not confined to Paris. In Nigeria, a suicide bombing blamed on Islamist extremist group Boko Haram extremists, killed 32 people and wounded 80 at a Nigerian market. The world of course took little notice as the focus was on Paris. Yet this is a reminder that the war on terror is going to be long and hard to win and even harder if you try not to acknowledge that they is a war to win.
In the meantime oil tried and failed to break down through the $40.00 a barrel support on option expiration day even as the market closed lower and the US dollar soared. The dollar is rallying in part because of the mindset that the Fed will raise interest rates next month but also because the dollar is be viewed as a safe haven alternative to Europe in the aftermath of the terror attacks.
Overnight the market rallied after the American Petroleum Institute reported that crude supply fell by 482,000 barrels defying expectations. A jump in refinery runs seemed to account for the drop but the market reaction was muted because they still reported an increase of 1.3 million barrels in the Cushing, Oklahoma delivery point. The API also reported a 1.5 million barrel drop in distillate supply and an increase of 236,000 barrels.
Dow Jones reports the United Arab Emirates’ energy minister said Wednesday he was confident the crude oil market will balance itself and there are already signs it is stabilizing, defending OPEC's decision last year to keep the production ceiling unchanged despite the plunge in oil prices. "I think that's the wise thing to do and we are not regretting the decision we took," Suhail al-Mazrouei said at an industry conference in Dubai on Wednesday. “I'm sure that the decision was right and I'm confident that the market will stabilize...we've seen some of that stabilization."
We agree that the market is going to stabilize. With shale producers cutting budgets and hundreds of billions of oil projects getting cut, we are creating the next super spike. While in the short term the market is focused on the current glut and a slowdown in China in the long run prices will be driven by the projects that will be not finished for the future. Bloomberg is reporting- Saudi Arabia’s crude oil stockpiles fell from a record amid signs that overseas demand for refined products was picking up as margins improved.
Stockpiles dropped to 322.7 million barrels in September from 326.6 million in August, the highest since at least 2002, according to data published Wednesday on the website of the Riyadh-based Joint Organizations Data Initiative. Gasoline exports climbed to a record and Saudi Arabia’s own refineries processed 2.5 million barrels of crude daily, an all-time high and up from 2.2 million barrels a day in August.
Refineries are earning so much money from the low cost of crude and higher selling prices for their products that they are cutting back on maintenance. Plants are usually taken off line for repairs in September and October. Saudi Arabia’s Yasref oil refinery is processing crude at full capacity as margins improved since August, Chief Executive Officer Mohammad Alshammari said last month. Start to get ready for the long term now.