What Typical Looks Like In Mid November 2015 With The Dollar And Oil Seeking Direction

The sound-barrier piercing drop in crude prices in the last four sessions has finally gotten everyone’s attention on worries that U.S. government data will show a seventh weekly U.S. rise in reserve stocks.

West Texas Intermediate crude prices fell nearly 3% on those jitters, although it has come up off those lows booking a loss of about -2.60%, just above the psychologically important $43 level.

U.S. stocks jumped 6.3 million barrels last week, powered by a giant rise at the Cushing, Oklahoma, delivery point. Higher imports offset increased runs on refineries outputs at the tap. An industry group, the American Petroleum Institute, showed the stunning data late Tuesday.

A poll of Reuters analysts had forecast a more reasonable build of about 1 million barrels.

"With U.S. commercial crude cover likely to see new 80-year highs by month's end amidst some indications that the rate of production decline is slowing, our long held view that WTI will be re-visiting the late August lows of $37.75 has been reinforced," said Jim Ritterbusch of Chicago oil consultancy Ritterbusch & Associates.

We don’t see a huge positive future for crude prices. There is a South American-Arab OPEC meeting going on and countries like Ecuador and Venezuela are fighting hard to push the price back over $50, by a special benchmarking action or through production cuts.

Even if that works, North America, with its more expensive crude oils is sitting high on a mountain waiting to swoop down. The real problem for South American producers – and Middle Eastern producers as well ­– is that technology has caught them with their pants down.

Exploration and extraction have simply advanced faster than anyone in those two regions thought was possible.

The U.S. dollar is down on one knee for another time out today. The greenback is really trading in a tiny range that is awaiting fresh news from the more jibber-jabbery members of the Fed, or some sign in the American economy that will provide the final nudge over the cliff and into the sea of interest rate hikes.

The buck is off a small fraction in seesaw trading.

The modestly weaker dollar helped gold offset a $7.50 loss in regular trading as of 3:30 in New York. The net loss then was gold off at $-5.00, or -0.40%. (At 4 o’clock in New York.)

That was the best performance of any precious metal. Silver was off 0.90%, platinum off 2.00%, while palladium went back into freefall at -3.70%.

Equities in New York are down but they took a rather big bump in the road pretty much in stride. Big retailer Macy’s was down almost 15% early in the day. (Macy’s stock is already down more than 25 percent year-to-date.) 

The company cut full-year sales and profit forecasts, after posting a surprise drop in Q3 same-store sales as domestic customers pulled back suddenly on spending and the robust dollar pressured revenue from tourists.

Many market analysts today were viewing Macy’s as a bellwether. In our book, though, crude oil is a much bigger drag on equities, although it seems every few weeks we get a price drop followed by speculators willing to bid oil back up.

Wishing you as always, good trading,