The Daily Dose

Crude oil prices were deep in the red in early Tuesday trading amid disappointing results from some of the world’s largest companies. Brent finished in positive territory in a Monday session lightened by a US federal holiday. Most of the momentum from Q4 earnings were reflective of negative trade pressures, though flooding in Mississippi could create some tailwinds for WTI if they persist.

Brent crude was down 2.3% as of 8 a.m. ET to $56.37 per barrel. Despite a rally last week of more than 5%, the global benchmark is still well below the peak for the year set at $68.91 per barrel on January 6.

Glencore, the world’s largest commodities trading firm, reported its first annual loss since 2014 after taking a $2.8 billion write-down on coal and other segments. CEO Ivan Glasenberg said the outbreak of the coronavirus would be a factor to watch moving into 2020, though much of the damage had already been done.

“Our performance in 2019 reflected the prolonged and uncertain trade deal negotiations, generally weaker prices for our key commodities and some operational challenges experienced at our ramp-up/development assets,” he said in a statement.

Mining giant BHP, meanwhile, was somewhat forward-looking after reporting a 29% increase in second-half profits. The company said the coronavirus had only a minor impact on its operations and much of the weakness was already entrenched.

“Six months ago, at the time of our full year results for the 2019 financial year, an air of prudent caution permeated commodity markets,” Huw McKay, a vice president for market analysis, said in a statement. “On balance, events since that time have justified that caution.”

Tech giant Apple, meanwhile, said supplies of its flagship iPhone would be constrained by the impact of the coronavirus in Asia. Retail behemoth Walmart reported revenue of $141.7 billion, some $820 million lower than expected. The company stated that holiday sales were not as strong as anticipated.

Few of those factors are related to the headwinds, real or imagined, blowing from the coronavirus. The broader market, however, is feeling the strains. Commodity tracking firm Kpler reports dozens of LNG diversions away from the Asian market and Refinitiv reports the same for crude. While assessing Asian storage levels is somewhat of an opaque art, builds of any sort are typically bearish factors.

Elsewhere, the European Automobile Manufacturers Association reported new car sales dropped in January on weaker economic conditions and Brexit uncertainty. Flooding in Mississippi is a growing concern, with some 1,000 homes under siege by rising waters from the Pearl River. Chevron’s 352,000 bpd Pascagoula refinery may be impacted if flood waters impact areas along the Gulf of Mexico. And don’t forget Libya. There were reports Tuesday of heavy fighting in and around the port of Tripoli.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s