Business

Authored by Nick Cunningham via OilPrice.com,

Oil prices are heading down again on swelling U.S. crude oil inventories, with Brent dropping below $50 per barrel for the first time this year.

The OPEC deal that has taken more than 1 million barrels per day of oil off the market has not succeeded in reversing this bearish trend for inventories. And with the deal at its midway point, focus is shifting towards an extension of the cuts through the end of the year.

'Reflation'-themed fund-flows are fading fast (with equities, cyclicals outflows accelerating), and 'higher rate beneficiaries'-linked bond flows (bank loans, HY, inflation protected) slowing to multi-month lows. As RBC's head of cross-asset strategy, Charlie McElligott notes, their model shows the ETF inflow story is no longer a price-driver of short term stock market pricing... "it's a new regime."

McElligott notes the following three key themes remain:

The Fed's most recurring lament over the past 8 years, ever since the Financial crisis, is that there has been no measurable inflation in the US economy when using such conventional indicators as CPI, even though according to recent measurements by PriceStats real inflation, not the BLS' seasonally-adjusted, goalseeked and politically convenient  mutant, is now running at a blistering 3.6%, the highest in five years.

With crude production at 13-month highs, the trend of rising rig counts (now up 10 weeks in a row) suggests OPEC remains anything but in control as the global inventory glut deepens. The last week saw the oil rig count rise by 21 (the most since January) to 652 - the highest since September 2015.

From 318 at its trough in May 2016, the US oil rig count is now up 332 to 652 (a double) - tracking the lagged WTI price perfectly...

Bloomberg Intelligence analysts Andrew Cosgrove and William Foiles wrote in a note Monday.

Authored by Nick Cunningham via OilPrice.com,

Venezuela’s economic crisis continues to deepen. The South American OPEC member is thought to be sitting on nearly 300 billion barrels of oil, far more than any other country in the world, including Saudi Arabia (estimated at 268 billion barrels). But the economy has been in freefall for several years, with conditions continuing to deteriorate.