Market Currents – Toulouse-Lautrec EditionTags: ClipperBlog
One hundred and fifty-one years after the birth of Henri de Toulouse-Lautrec, and today is unfortunately shaping up to be anything but a pretty picture. The oil market is being boosted by geopolitical tension, as Turkey has shot down a Russian war plane which was apparently over Turkish airspace. As conjecture swirls as to whether the plane was over the border in Syria, the result is an increasingly skittish crude market.
Overnight we have had preliminary Japanese manufacturing, which came in better than expected, and at a level not seen since October last year. Germany has brought further economic optimism, with business sentiment data – the IFO Business Climate Index – coming in at a seventeen-month high. Meanwhile, the latest reading of German Q3 economic growth was in line with expectations, up 0.3% QoQ and up 1.8% YoY.
Onto the US, and the latest revision to Q3 GDP has seen it raised from 1.5% to 2.1%, in line with expectations. An update to Q3 consumer spending saw it tweaked a little lower to 3.0%, shy of both the prior reading and consensus of 3.2%.
Copper prices yesterday made a new six-year low, pressured lower by persistently lower demand in China and an increasingly stronger US dollar. Prices have fallen nearly 30% this year, and are down nearly 60% from the highs in 2011. As we all know, misery loves company, hence as the chart below illustrates, a rising dollar does not discriminate between commodities. Oil and metals are bonded by their similar fates – a clobbering:
When looking for a silver lining among commodities, we can always find one these days in retail gasoline prices. The national average is now down to $2.06/gallon, with states such as South Carolina paying considerably less. California, the most expensive of the lower 48 states, is seeing prices edging lower to below $2.75/gallon, but still not retesting the lows seen at the beginning of the year like a lot of states are (due to refinery issues earlier in the year).
Current low prices are as good as we are likely to see before December, according to gasoline guru @TomKloza. This notion is affirmed by price action in crude today; a knee-jerk higher by crude prices in response to the downing of a Russian war plane is likely to lead to a pop at the pump, as the physical market tries to preempt the ripple effect.
Finally, according to EIA, energy-related emissions increased 1% last year, lifted by the transportation sector and higher energy use in buildings. Increased emissions from the transportation sector has been sponsored by lower fuel prices and ongoing economic recovery – more than offsetting improved fuel efficiency.
Higher energy use from buildings has been due to the combination of weather and economic activity. Nonetheless, energy-related CO2 emissions last year were still roughly 10% below their 2005 level.
About The Author
Matt is a Director of Commodity Research at ClipperData. Matt specializes in extracting key themes from technical and fundamental analysis of the global energy market, and communicating these through daily and weekly deliverables. He also provides oil and natural gas analysis and commentary to national and international media outlets that include CNBC, Fox Business, Russia 24, the Wall Street Journal, MarketWatch, AFP, Bloomberg, Reuters, and the Oil Daily. Prior to joining ClipperData, he worked for eight years at Schneider Electric / Summit Energy as a Global Commodity Analyst, where he also founded and authored the blog, Energy Burrito. He started his career at the Royal Bank of Canada in the UK, spending eight years with the bank. During that time, he managed $55 million in assets as a portfolio manager and financial analyst.