THIS IS THE WEEK!
Not because of the Trump-Xi meeting at the G20; we already know the outcome: a “very beautiful” meeting between two “truly great friends” who will agree to keep conversing for a while longer, yaddi, yaddi, yadda, which the market will love…until the next devastating tweet.
No, this is the week of my annual Atlantic salmon fishing trip on the “very beautiful” and “incredibly powerful” Moisie river with five “really superb human beings”, none of whom know the outcome of their “incredibly skilful efforts” other than that we will all have an “exquisite time” together, particularly at the dinner table where “truly unbelievable” stories will be graciously shared, riveting faithful narrations of “fabulous” tales, mostly about lost salmons, the “enormous” size of which fattening in sync with the number of “really exceptional” wines uncorked by our “extraordinarily convenient and generous” wine “connaisseur par excellence” friend.
Tight lines!
Chicago Fed National Activity Index Rebounds
The Federal Reserve Bank of Chicago reported that its National Activity index rose to -0.05 during May following an April decline to -0.48. The three-month moving average increased to -0.17, its highest level since January. During the last ten years, there has been a 42% correlation between the Chicago Fed Index and the q/q change in real GDP.
The National Activity Index Diffusion Index, which measures the breadth of movement in the monthly series, increased to -0.12, its highest level also since January. This measure remained, however, below the peak of 0.37 in December 2017.
Improvement in the May index was led by the Production & Income series which rose to 0.07, the first positive reading since December. The Sales, Orders & Inventories figure improved m/m to neutral. The Personal Consumption & Housing Measure ticked higher to -0.06. The Employment, Unemployment & Hours series returned to negative territory.
(U.S. Oil Exports Rising Amid Middle Eastern Turmoil U.S. crude exports are surging, reflecting strife along the Strait of Hormuz that has given oil buyers second thoughts about the Persian Gulf.
(…) EIA data released last week showed U.S. crude exports on the rise, pushing to 3.4 million barrels a day during the week ended June 14. The record, set in mid February, is 3.6 million barrels a day. At the same time, imports from OPEC members are at a 30-year low. (…)
A Leader of America’s Fracking Boom Has Second Thoughts
(…) Companies long valued on growth prospects are seeing new capital dry up as many find it more expensive than anticipated to meet lofty production goals. Under pressure to generate positive cash flows, executives are slashing overhead and dialing back drilling plans.
As the frenzy slows, the pace of U.S. production growth is set to moderate this year. Many older wells are falling short of expectations, and some operators acknowledge that they have fewer future drilling locations than they once predicted.
Over the past 10 years, 40 of the largest independent oil and gas producers collectively spent roughly $200 billion more than they took in from operations, according to a Wall Street Journal analysis of data from financial-information firm FactSet. During that time, a broad index of U.S. oil-and-gas companies fell roughly 10%, while the S&P 500 index nearly tripled. (…)
The Journal previously reported that thousands of wells drilled in the last five years are producing less oil and gas than companies forecast to investors. Pioneer is among the companies whose wells in some areas are on track to fall short of expectations, according to the Journal’s analysis. The company disputes the findings, saying its methodology for estimating well productivity differs from the Journal’s. (…)
More on this and oil on the Goehring & Rozencwajg Associates’ blog.