Crude oil continued to slide lower in early trading, as the number of factors that threaten demand seem to continually increase. Front-month crude futures are down over 7% in July alone, as the market seems to have been flooded with supply. With the market on track to post the worst monthly loss since July 2016, U.S. output remains at record high levels. Analysts are predicting a 3 million barrel drop in inventories in tomorrow’s EIA report.
In other oil news:
-RBOB Gasoline futures are down around 2% in early Tuesday trading.
-Kuwait Foreign Petroleum Exploration Company is in the process of borrowing $1.1 billion to spend on oil and natural gas projects as the company intends to build its shale operations.
-BP reported that they were more profitable than expected in the second quarter, shortly after announcing its biggest deal in two decades: the purchase of Australian mining company BHP Billtion Ltd.
-China & the U.S. are trying to restart trade talks in an attempt to avert a full-blown trade war between the world’s two largest economies.
Trade-War Fears Ease
Stocks are up, and Treasuries are lower as the attention of the market may have turned from an impending trade war with China to the upcoming earnings season. ES futures are up for a fourth day in a row, the longest positive streak since early June. Euro stocks are also up, as gains were seen in energy companies while oil held around $74 a barrel. The dollar is also higher, and the euro is lower as some confidence in the greenbacks may have come back into the market.
Investors may be ready to focus on earnings season & economic data, instead of trade war headlines that may never come to fruition.
U.S. Stocks Hit 12-Week High
After opening near overnight highs, U.S. stocks reached their highest levels since March, following European & Asian indices as it appears that optimism over the economy may have given investors a confidence boost. Front-month ES futures rose for a second day in a row, as Microsoft agreed to buy coding site GitHub for $7.5 billion.
It’s possible that traders may be starting to ignore every tweet or announcement made on the trade front. Last week seemed like a seesaw to some, as tweets & speeches flew out of China, Canada, Mexico, Europe, and the U.S. at a dizzying pace, which each country making its own opinions & threats heard about the various trade agreements between all parties involved. Investors may be instead turning to the impressive U.S. jobs data on Friday, providing the market with some needed confidence after such a rocky week. However, the risk for more rockiness in U.S. stocks is not over. G-7 leaders will meet in Quebec later this week, as the EU & Canada threatens retaliatory measures for Trump suggesting that the U.S. imposes new aluminum & steel levies.
Memorial Day weekend was likely a stressful one for many farmers around the country, as some rushed to finish planting after being in areas that received far above-average levels of rain in the last couple weeks. Some speculators believe that this year’s spotty planting season has been a major factor in seeing contract highs in corn, soybeans, and wheat.
December Wheat futures hit contract highs in early Tuesday trading, as worries about adverse weather across key growing regions threaten to reduce crops.
Soybeans rose as hopes spurred that China will resume buying U.S. beans again, after the recent trade dispute disrupted purchases.
Corn is up too, possibly drawing some support from wheat on similar weather concerns.
U.S. Stocks Update
U.S. stock futures have been heading mostly lower in early Thursday trading. Selling action by some speculators may have been triggered by renewed fears of a conflict with North Korea. Choe Son Hui, the nation’s vice minister of foreign affairs threatened a “nuclear-to-nuclear showdown”. President Trump responded this morning with an open letter, stating that the US will be pulling out of a long-planned summit with the nation.
Futures were trading higher yesterday, after the FOMC meeting minutes indicated that they will not be too aggressive in raising rates. Fed Fund futures indicated an increased likelihood that we will see only two more interest rate hikes this year, versus the three that was expected before the minutes were released.