The Daily Dose; Tailwinds from vaccine prospects subside

-Dallas Fed sees signs of a modest slowdown.

-India’s economy entered a technical recession.

Crude oil prices wavered between gains and losses for much of the session on Wednesday, but the bulls were losing grip amid a trove of negativity. India is showing an increase in fuel demand, but its economy is also in recession. OPEC+ is likely to show restraint, but that does little to address the cheaters. Elsewhere, there’s something of a global sigh of relief as President Donald Trump runs out of ways to litigate his way to a second term. And in Texas, the economy is showing signs of slowing down.

Crude oil prices were bouncing around for most of the trading day, but faltered late in the session. As of 2:32 p.m. ET, Brent was down 0.62% to trade at $43.53 per barrel and falling fast.

Gasoline and product inventories in the United States all fell last week, which would be normally bullish for the market. But the Energy Information Administration reported a surprise build in crude oil inventories, to the tune of 4.3 million barrels from the previous week. Total products supplied, a proxy for demand, averaged 19.1 million barrels per day for the last four-week period, down some 11% from the same time last year. With new cases of COVID-19 on a frightening rise, lockdowns could be troubling for future demand prospects.

India, holding the No. 2 spot behind in the United States in terms of COVID-infections, saw its first increase in petroleum demand since February. Javier Blas at Bloomberg tweeted this morning that October consumption was up 2.7% year-on-year in a sign that demand growth was emanating beyond China. But don’t get too excited. In its first-ever “nowcast,” the Reserve Bank of India estimated GDP contracted 8.6% during the quarter ending in September. That’s two straight quarters of contraction, leaving India’s economy in a technical recession. Yes, we know the third quarter is over. But nobody expects the US economy to post 30-something percent growth in the fourth quarter like it did in the previous period and it’s likely that India won’t either.

Speaking of the US economy, the Federal Reserve Bank of Dallas finds the Texas economy continues to recovery from spring doldrums, but resurgent cases are creating a drag. Job growth in the state is at 3.6%, well below the national rate of 11.9%. But it’s not all bad.

“While manufacturing growth continued in October, gaining some momentum, services and retail respondents reported slowing expansion,” the Fed’s report read. “The rig count in Texas has increased since September, suggesting mild improvement in the energy sector.”

Weaker demand prospects make it unlikely that OPEC+ will ease back on production restraint, though perhaps the one sure thing about OPEC is that members like to cheat. Apart from Iraq, it looks like Venezuela is back in action. At least 18 tankers are headed to Venezuela to load up on crude oil in the coming weeks. So far, nine tankers have already loaded 6 million barrels of crude in November, suggesting exports this month could go beyond October levels of 359,000 barrels per day, its lowest in something like 80 years.

On Wednesday, Iran walked back comments on exports after suggesting it was sending out some 700,000 bpd despite stiff US sanctions. That, along with Venezuelan renewal, could be a warm up for the incoming Biden administration. Seeking to reinsert the United States into the liberal world order, Biden is expected to rejoin the multilateral nuclear agreement with Iran and take a softer line on long-time adversary, but top exporter, Venezuela. And Biden may have international support. Having a bit of fun with President Trump’s campaign slogan, and speaking on Biden’s expected return to the Paris climate agreement, French President Emmanuel Macron said the former vice president will “make our planet great again.”


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