Oil: A Game Of Push & Pull 😖 Iron Ore Puts The Hammer Down 🔨

Table of Contents

1. Oil: A ~Game Of Push & Pull

Since oil’s precipitous end of year decline, the market has been ruled by conflicting push and pull factors keeping its price in a sideways range. And while volatility can bring great returns for shrewd day-traders, it can be a serious headache for longer-term investors.

Brent Crude Oil has been stuck in a range of around $60-63 since the 9th of January thanks to the counteractive forces of weakening global growth, Venezuelan sanctions and OPEC supply cuts.

Global growth concerns returned with a bang yesterday after the Eurozone forecast a weaker outlook and President Trump announced that no further trade war meetings were scheduled until the 1 March deadline…Cutting it rather close! Simply put, lower growth translates to weaker oil demand, growing inventories and downward pressure on prices (pull effect).

On the other hand, OPEC continues to support prices by ensuring its members reduce production to maintain stability in the market with Saudi Arabia decreasing its production to 1.7 million barrels per day (bpd) (push effect). However their hard work is being offset by record production in the US clocking in at a whopping 11.9 million bpd (pull effect).

Whilst the effect from the Venezualan crisis has been mild thus far, the longer the crisis persists, the greater the impact will be as over 300,000 – 500,000 bpd of exports are wiped out (push effect). But for now the game of tug of war continues. Which side will win? Only time will tell.

2. Iron Ore Puts The Hammer Down

Iron ore took off at a rate of knots yesterday, surging more than 5% on concerns that Brazil’s top producer, Vale, would cut global supply by another 30 million tons. And that’s not even half of it!

Last month’s deadly dam bust, which killed over 150 people, supercharged the price of iron ore after the first mine closure which cut supply by a whopping 40 million tons.

While Vale is pursuing legal action against the operations suspension at its second mine in Brucutu, the idea of a chain-reaction of closures to other Vale-owned sites has rattled the mining industry, posing a major risk to price stability in both the mining and manufacturing industries.

Prices have skyrocketed 8.9% this week to add to an immense 14% last week as the situation deteriorates and the major risks to the industry become more apparent. The drama has all played out while the world’s largest iron ore importer, China, has been closed for its Lunar New Year.

Analysts are prepping for a momentous Monday when Chinese companies return to the fray with significant volume. So if you’re invested in iron, better hold onto your hat because it could get volatile.

At this early juncture, investors are seeing upside mainly potential for iron as the crisis deepens, but any positive developments will send iron’s price down and Vale’s price back up. Keep your eyes peeled.

 

Today we are watching…

1. Exelon (#exelon)

Exelon has had a strong year, rising over 30% since the start of 2018. Recent cost optimisation mechanisms have assisted in increasing profit margins and operational efficiency which will likely continue into 2019. Analysts are expecting good things from its earnings report today with the EPS estimate at $0.57 (+3.6%) on revenue of $7.2bn (-15%). This is definitely one to watch!

2. Coty (#cotyinc)

Having lost over 64% of its value over a 52 week period, US cosmetics company, Coty, is looking in bad shape ahead of its earnings announcement today. A number of supply-chain hurdles, freight costs and shortages from external suppliers of its luxury branch have hurt the company’s margins and don’t look to be letting up soon. The consensus EPS estimate is $0.22 (-31.3%) on revenue of 2.47bn (-6.4%).

 

Share:
More Posts
From One Rock to Another 🚀

NASA’s OSIRIS-REx mission, after a seven-year journey, successfully captured and delivered asteroid samples.

Too Much Debt  💳

Rising credit card debt and delinquencies have created losses for credit card companies.

Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.