What to know today

  • Not a whole lot of rate-cut worry in these numbers… 
  • OPEC+ will continue to bite.
  • The US is the world champion of oil production.
markets

This Is a Healthy Uncertainty

The struggle is real, and it’s generally good.

The major equity indexes opened in the green this morning then fell sharply, no doubt reacting to hotter-than-expected Producer Price Index data and softer-than-expected retail sales data for February.

We got the action generally correct in our preview yesterday morning: a big move one direction right on the news, an even bigger move the other direction upon a little further reflection.

The indexes trended down through the day but did bounce off the day’s lows into the close.

That mix of data – including fewer people applying for first-time unemployment insurance – has investors, traders, and speculators thinking the Federal Reserve can be as patient as it wants to be before it makes a move on the federal funds target range.

It’s a healthy sort of uncertainty, a dynamic economy still in flux following a global-historical disruption amid major wars on two continents and a grinding election season.

That end-of-day spike is not a bad end, even if the S&P 500 closed in the red.

S&P Intraday Chart on March 14 2024

As Dan Rohinton of iA Global Asset Management said in a Pro Tips interview on Thursday, “The US economy is the most dynamic, profitable, and innovative economy in the world.”

Dan further noted that “the US economy has foundational strengths that will carry it forward from strength to strength over the long term.”

Those “foundational strengths” go well beyond the so-called Magnificent Seven, and money is moving into areas that have been overlooked while those stocks have been carrying the market.

The Magnificent Seven have done well for good reason: They have the best margins, the best growth, the best balance sheets, and reasonable valuations as a whole.

But Dan sees scope for broadening out of the economic momentum that we've seen, and he sees other sectors participating.

As ever, there are “pockets of opportunity and pockets of risk.”

Be sure to check out the complete Pro Tips interview with Dan Rohinton.

deep dive

WTI Hits a Four-Month High

Supply is tightening and demand is rising.

The International Energy Agency said on Thursday that the world will face an oil shortage if OPEC+ continues its production cuts through the second half of the year.

The IEA said only last month that global oil markets were looking at a “hefty build” in inventories. But, earlier this month, OPEC+ announced it was extending its 2 million barrel-a-day production cut through the end of June.

The IEA is assuming Saudi Arabia and its friends will keep the cuts in place through 2024, thus shifting its implied balance “into a slight deficit.”

So the front-month West Texas Intermediate crude oil contract surged more than 2 percent, topped $81 per barrel, and reached a four-month high.

The IEA also forecast rising oil demand, citing two major factors.

WTI Crude Chart intraday march 14 2024

One of those is the irony that global shippers need more fuel to reroute their vessels away from the Red Sea and the threat of attack by Houthi rebels in Yemen.

The other is the global economic powerhouse that is the United States of America right now.

World oil demand will grow by 1.3 million barrels per day this year, an upward revision of 110,000 barrels.

The growth rate has slowed from last year, when it reached 2.3 million barrels per day, due to a combination of efficiency gains and proliferating electric vehicles.

Still, the IEA says total demand will reach 103.2 million barrels per day this year, up from 101.8 million last year.

deep dive |
March 15, 2024

WTI Hits a Four-Month High

ENERGY

US Oil Output Is a World Record

No country has ever produced this much crude.

One of the major factors supporting what Dan Rohinton described as “the most dynamic, profitable, and innovative economy in the world” is energy independence.

Indeed, on Monday, the Energy Information Administration confirmed that the US is producing more crude oil than any country ever.

a chart with the average annual crude oil from top 3 global producers between 2013 and 2023

The US broke its own production record from last year, and the EIA says it’s likely to be the world champion for the foreseeable future:

The United States produced more crude oil than any nation at any time, according to our International Energy Statistics, for the past six years in a row. Crude oil production in the United States, including condensate, averaged 12.9 million barrels per day (b/d) in 2023, breaking the previous U.S. and global record of 12.3 million b/d, set in 2019. Average monthly U.S. crude oil production established a monthly record high in December 2023 at more than 13.3 million b/d.
The crude oil production record in the United States in 2023 is unlikely to be broken in any other country in the near term because no other country has reached production capacity of 13.0 million b/d. Saudi Arabia’s state-owned Saudi Aramco recently scrapped plans to increase production capacity to 13.0 million b/d by 2027.

Stocks in the energy complex – exploration and production companies, services names, the big integrated outfits – are outperforming in 2024 too.

Perhaps the best single indicator of the changed market landscape from last year to this year is that Exxon Mobil $XOM is hitting six-month relative highs against Apple $AAPL.

Usually stocks and commodities – and commodity-related stocks – don’t move together.

It’s important to understand that lingering inflation is a positive for both. 

past issues

read more from our daily investor newsletter