Tuesday, October 25, 2016

WTI Back Toward $50 -- Not Good News For The Saudis -- October 25, 2016

Apple Watch: after hours -- shares steady, slightly green.
  • 3:05 p.m. CT -- gradually creeping up; earnings not announced yet
  • 3:09 p.m. CT -- someone must know something; just turned red; after-market trades slightly down from the close; buy on the rumor; sell on the news; closed at $118.25; big question, will shares go below $115 in after-market trading?[See below -- id did.] Now, right at $118 at 4:11 p.m.
  • 3:26 CT -- first significant movement since close of market -- and the direction? Up. But didn't last even a minute; back to red, just slightly. A lot of trades must be happening as we approach the 4:30 ET mark; yup, now it's green again at 4:27
  • 3:28 p.m. CT -- definitely green;  
  • 3:30 p.m. CT -- there we go -- up over $120! But immediately drops back.
  • 3:34 p.m. CT -- down over a dollar; someone must know; now under $117 (3:34)
  • 3:35 p.m. CT -- down to $116; will it go below $115?
  • Over at Twitter the numbers are out: EPS at $1.67 beats $1.66 forecast; revenue of $46.9 billion in line; guidance of $76 - $78 billion, above expected guidance of $75 billion; shares immediately jumped 2.5% but then fell back; $115.88 at 4.39 p.m. ET. 
  • 5:19 p.m. CT -- this is probably the low for the night: $114.90.
Saudi Arabia: tough OPEC equation with mounting "exemptions." -- Bloomberg. This is Bloomberg's analysis of the Iraq "exemption." Saudi has three choices:
  • carry a greater burden within the group;
  • cede market share to other producers (I'm not sure how that differs from the previous bullet); or, 
  • lose credibility by softening the terms of the deal.
In a worst-case scenario, Saudi Arabia will have to cut production by more than 1 million bbls/day, sending the kingdom's output to a two-year.

This is a disaster for Saudi Arabia. Even if they cut by more than 1 million bbls/day, there is no guarantee that the price of oil will rise enough to meet their budget needs. They could end up draining cash reserves even faster than they are now, which by the way, I cannot find the September numbers even though it is almost November. The most recent update, which included the August numbers, have been out there forever.

Back to the Bakken

Active rigs:

Active Rigs3568194182188

RBN Energy: US producers are coming back, despite low prices.

Big story everywhere: from NPR to The Wall Street Journal -- as premiums jump 25% and insurers flee, administration extends sigh-up for Affordable (LOL) Care Act. I think everyone pretty much agrees this is the beginning of the end. Next iteration: HillaryCare. At some point, ZombieCare -- it will never, ever die.

Lots of business stories:
Other news.
Tesla: from Investopedia --
In an interview with the Washington Post, Fisher said Tesla had taken a basic platform and “added so many overly complicated features”, such as automated front doors, middle-row seats on power sliders etc. “All those things add up in a way that can bring the platform down,” he said. “The falcon-wing doors are kind of an accident waiting to happen,” Jake Fisher, Consumer Reports’ Director of Automotive Testing, said.
Talk About A Market That Can't Get Any Traction

Apple is expected to announce 3Q16 earnings after the market closes. Apple had done well as of late after the Samsung implosion, or should we say, "Samsung explosion"? It is expected that Apple will announce first full-year revenue decline since 2001. The shares are still up despite that bit of negative news and on a day where the market is negative. It is barely up, about 35 cents on $118/share.

Late afternoon trading: Dow 30 down 43 points; WTI below $50 at $49.81
  • new highs - 62: BHI, BAX (a huge whoop), SandRidge Energy, 
  • new lows - 28

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