The morning began with refined products and crude both surging upward. Diesel was up $.02 and gas was up almost $.05, while crude was up $.30 as of 8:00 a.m. ET. As the day progressed, we witnessed a swing in action for diesel, dropping off $.0050, along with crude, which–was down $.50 as of 12:15 p.m. ET. Gas, on the other hand, is still holding strong, up $.04. This could be a result of decreased imports, but from a statistical/historical standpoint, RBOB is typically lower in inventories in comparison to heating oil and crude.
Crude hit $28.36 today, continuing to decrease from Friday, when it eased into the $20 range.
- IEA sees further stock builds in 2016, leaves oil demand growth forecast at 1.2 mbpd.
- Exports of Russian Urals and CPC crude resume at Baltic Sea ports following bad weather.
- Oman announces oil storage project which will boost capacity by 25 million bbls by 2019.
- China’s oil demand likely rose 2.5% last year, but 2016 looks weaker.
- Oil sucks equities down as global recession fears bubble up.
With a continued decrease in oil prices, the stock market could be hit with a deflationary effect, which could lead to a global recession. Sure companies are happy they are paying less for fuel, as well as consumers at the pump, but should they be concerned as well? Here is an interesting quote to ponder: “$28 oil is fantastic for importers," said Josh Crabb, head of Asian equities at Old Mutual Global Investors in Hong Kong. "But in the short term it really comes down to sentiment, which means that oil down is bad because it means inflation is bad. It just creates a whole lot of issues for the economy." Also, here is a statement from the risk-management firm Axioma in Singapore: “The rout in commodity prices isn't caused by small imbalances in supply and demand for those commodities, it is based on the belief that the global economy isn't returning to growth and might slip dangerously close to recession.”