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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Soaring U.S. Dollar Sees Crude Tumbling Again

Soaring U.S. Dollar Sees Crude Tumbling Again

In honor of what would have been Johnny Carson’s 90th birthday, the oil market is full of chatter to finish the week. We’ve had a bunch of economic releases to promote discussion overnight, while monetary easing is the talk of the town today.

Japan’s flash PMI manufacturing print kicked off a decent dump of data, coming in at its highest level in over one and a half years. Across to Europe, and the Eurozone’s flash prints for both manufacturing and services were better than expected, led by German services and a decent showing from France for both numbers.

After a mottled picture has been presented by individual Eurozone countries in the last year or so, we are seeing some alignment in the data of late, with France, Spain, and Italy all joining Germany in looking a little more shipshape. Related: U.S. Shale Drillers Running Out Of Options, Fast

Japan

Broader markets are shirking pre-Halloween scares today, and are embracing signs of looser monetary policy across the globe. The crude complex, however, has had concrete boots placed on it by a soaring U.S. dollar, as the door is opened once again for the potential of a U.S. rate hike in December.

This is not only because further stimulus measures may be underway from the Eurozone starting in December, but because China has just cut interest rates again to try and provide a caffeine shot to its tiring economy. Related: Is Russia The King Of Arctic Oil By Default?

It not only cut its benchmark interest rate and one-year borrowing rate (to 1.5 percent and 4.35 percent, respectively), but also its reserve requirement ratio, trying earnestly to promote borrowing, investment, and spending. Interest rates have now been cut six times since last November.

Patricia

On a very serious note, Hurricane Patricia, which is off the Western coast of Mexico, has become the strongest hurricane on record. Winds have topped 200 miles per hour, and are bringing the potential for 40-foot waves along the Mexican coast, as well as violent flash flooding. There is a chance that the storm could carry across land over the weekend, and into the Gulf of Mexico early next week – potentially threatening oil infrastructure.

And now for something completely different. The chart below highlights how the spread between regular and premium gasoline has been increasing, in no small part due to the U.S. shale boom. Soaring production from shale plays has meant the market has been well-supplied with low-octane naphtha barrels, while high-octane blendstocks are less available, and have accordingly become increasingly expensive. Related: Future Of Iraq’s Oil Industry Under Threat

Demand for premium gasoline has also been outstripping regular gasoline, with low prices encouraging a shift to premium grade-propelled vehicles. Finally, given 90 percent of gasoline sales are for the regular grade, gas stations are likely to tilt their pricing more competitively toward regular gasoline. All of this is driving premium gasoline to an increasingly wider, um, premium:

PremiumGasoline

Finally,

By Matt Smith

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  • mark on October 24 2015 said:
    Relief as export ban on unprocessed minerals is lifted
    President Yoweri Museveni has lifted the ban on the exportation of unprocessed minerals by both local and international players, saying he was misled by his Advisors.

    In 2011, President Museveni, while hosting the annual round table with mining sector stakeholders at State House directed the Ministry of Energy and Mineral Development to stop miners from selling minerals in raw form, arguing that it denied the country income and employment.

    “When it comes to minerals such as Phosphates, Wolfram, Cobalt, Copper, Coltan, Nickel among others, it is criminal to export them as unprocessed ore,” read the Presidential statement that was circulated at the meeting. “We lose money and jobs by so doing.” The President reportedly equated exporting unprocessed ores to selling “mere soil” that would not fetch any significant returns.
    However, the President has since made a U-turn on that decision, much to the excitement of the mining community.

    “I am sorry I was misled,” he told a gathering of investors on Wednesday last week at this year’s Presidential round table at State House. “My Advisors were the ones causing this havoc,” he added, sending the audience into joyous applause.

    According to one of the mining investors who attended the meeting, President Museveni revealed that some officials at the Energy Ministry had convinced him that it was more economically viable to process the minerals in country than exporting them raw.

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