The Federal Reserve lit a fire under the futures markets making that pot O’gold at the end of the rainbow a lot more expensive. If the Fed can’t dazzle them with the brilliance, they will baffle with their blarney. So in the Fed statement, Fed Leprechauns seemed more like a group of Irish turtle doves cutting in half the amount of interest rate hikes to expect for the rest of this year. The Fed lowered its outlook for inflation and seemed to suggest they would welcome just a wee bit of it. The Fed also suggested that it was concerned about how their action might impact those oil consuming emerging markets. As I said yesterday, if the Fed was the least bit dovish, look for oil, not to mention other commodities, to soar and soar they did!
Crude oil also got support from the talk of the "Doha Initiative”. It appears the historic meeting between OPEC and non-OPEC producers is going to happen and the market is taking that as a sign we will see production restraint. This comes with more signs that producers can’t take much more pain.
Not only are we seeing energy companies warning that output will fall despite the rise in prices, Saudi Arabia is making moves to sell-off part of their state owned oil company. Bloomberg News is reporting that Royal Dutch Shell A (NYSE:RDSa) and Saudi Arabian Oil Co. are ending an 18-year refining partnership as the Anglo-Dutch crude titan prepares to sell billions of dollars of assets and Saudi Arabia’s national oil company eyes a possible initial public offering.
Shell will assume control of two Louisiana refineries operated by Motiva Enterprises LLC joint venture, as well as nine fuel terminals and rights to Shell-branded markets in Florida, Louisiana and the U.S. Northeast, the companies said Wednesday in a statement. Aramco will retain the Motiva name and take ownership of the largest U.S. refinery, in Port Arthur, Texas, along with 26 terminals and exclusive license to sell fuel under the Shell brand across Texas and much of the U.S. Midwest and Southeast.
The split comes as Shell eyes $30 billion in asset sales and Aramco explores plans for an IPO. Chief Executive Officer Ben Van Beurden has pledged to protect dividend payouts that consumed about $10 billion last year, even as the Hague-based company curbs its drilling budget to cope with the swoon in crude markets. An IPO may give Aramco a value of as much as five times that of Apple Inc (NASDAQ:AAPL), according to Bloomberg Intelligence.
Oil Inventories also came out more bullish than expected and the Wall Street Journal is reporting on the mystery of missing barrels. In a must read, the Journal reports that last year there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude.
Some analysts say the barrels may be in China. Others believe the barrels were created by flawed accounting and they don’t actually exist. If they don’t exist, then the over-supply that has driven crude prices to decade lows could be much smaller than estimated and prices could rebound faster.” Check out this interesting article.
We are seeing activity happen that normally happens at the bottom end of a trading cycle. It is a great time to focus on the long term in oil and natural gas. This is a historic time. It be may be a great time to start pursing some oil or start working on that pot O'gold.
Maybe the Fed should not issue a statement but instead an Irish blessing. Perhaps they could say,
May there always be work for your hands to do. May your purse always hold a coin or two. May the sun always shine warm on your windowpane. May a rainbow be certain to follow each rain. May the hand of a friend always be near you. And may God fill your heart with gladness to cheer you. Happy Saint Patrick’s day!