Murder Mayhem, Oil and Gas
Oil is trying to make a comeback against a backdrop of murder, and mayhem, not to mention some winter weather thrown in. While the oil rally Friday was slowed by a report that Iraq had restarted exports of Kirkuk oil, halted a year ago due to a standoff between the central government and Kurdistan's semi-autonomous region. Fears that the Kurds would see independence caused a shutdown of oil exports to Turkey. Yet, the new government in Baghdad agreed a tentative deal with Erbil to get the oil flowing.
As difficult of a position that might have been from a political viewpoint, it is not any more difficult than the evidence that is coming about the assassination of Jamal Khashoggi. The Washington Post reported that the CIA has concluded that Saudi Crown Prince Mohammed bin Salman ordered the assassination of journalist Jamal Khashoggi in Istanbul last month, contradicting the Saudi government's claims that he was not involved in the killing, according to people familiar with the matter.
Fox News Sunday reported that President Trump told Fox News' Chris Wallace that there was "no reason" for him to hear a tape recording purported to be of the murder of Saudi activist Jamal Khashoggi inside the kingdom's Istanbul consulate last month. "We have the tape, I don't want to hear the tape, no reason for me to hear the tape." When Mr. Wallace asked why he did not want to hear the recording, Trump said: "Because it's a suffering tape, it's a terrible tape. I've been fully briefed on it. There's no reason for me to hear it" The president added that he knew "everything that went on in the tape without having to hear it" before calling Khashoggi's death "very violent, very vicious and terrible."
Fox News say that the interview was broadcast one day after Trump vowed that his administration would "be having a very full report over the next two days, probably Monday or Tuesday." It was unclear whether the document would be made public.
Of course, for oil this report could have an impact on the price. Crown Prince Salman is already feeling the heat over the murder and is now angry that President Trump duped the cartel into producing more oil ahead of sanctions on Iran, only to grant waivers costing the Saudis and the rest of the OPEC cartel billions of dollars. Now the Crown Prince is pushing for a major cut in oil production at the next full OPEC meeting Dec. 6 in Vienna.
All this turmoil has led to the market's recent crash but there are signs that the bottom should now be in. There is the bulk of the demand season ahead. Talk of oversupply and slowing demand are overstated in our view, so we are looking for a rebound. The risk is that the global stock markets fall into panic or some banking or economic crisis. Other than that, we should start seeing a substantial recovery.
Natural Gas starting strong after a big bullish blowout last week. Andrew Weissman of ECB Analytics says that for the near-term, the key for natural gas is the timing, duration and intensity of the warm-up expected over Thanksgiving. Last week, the American and European weather models swung sharply, leading to nearly unprecedented volatility. He says that over the weekend, models shifted more bullish. If this holds, natural gas is likely to rally further on Monday. The December contract could test resistance as high as $4.83-4.99 early in the week. Later in the week, forecasts for early December weather could determine how high prices rise.
The intensity of cold weather is expected to moderate this week, easing electric heating demand and day-ahead power prices lower overall. The Thanksgiving holiday is likely to accentuate the slow-down as large industrial users shut down temporarily. In the meantime this winter will be a wild ride for natural gas.
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