Morning Minutes 9/16/2019

Morning Minutes

Oil Spikes Upward, Stocks Slide After Attacks On Saudi Production Facilities

September 16, 2019
8:45 am EDT

At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.

Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Oil prices have soared overnight and into this morning after Houthi rebels from Yemen claimed responsibility for attacks on Saudi Arabia’s Abuqaiq oil processing facility (the largest in the world) and the Kurais oil field (Saudi Arabia’s second largest) at one point knocking half of Saudi Arabia’s energy production off line. Although Saudi officials are rushing to get at least some of the lost production back up and running, investors have taken this as a stern reminder of the risks to energy supply from rising Middle East political tensions.

This morning finds both WTI Crude and Brent Crude up over 10% with WTI back above $60.00/bbl and Brent above $75.00/bbl. US President Trump has ordered the country’s strategic petroleum reserve to be used to offset any shortfall in supply but even then, US gasoline is up 9.8%, US heating oil is up 8.3% and natural gas is up 2.6%. Dow futures are down 83 points or 0.3%, while the Dax is down 0.5% and the Hang Seng fell 0.8%.

Stock markets around the world have been falling this morning in response to the news as this news has eroded complacency and reminded investors that there remain significant political risks out there which could have a negative impact on the world economy. In addition to Middle East tensions, the US-China trade war and Brexit remain unresolved. Over the weekend China reported disappointing retail sales (7.5% vs street 7.9%) and industrial production numbers (4.4% vs street 5.2%), reminding investors of the high stakes involved in current negotiations.

That being said, investors should note that oil prices still remain well below their 52-week high which was closer to $75.00 for WTI and are nowhere near the $100.00/bbl levels seen earlier in this decade, so thoughts of this oil price jump tipping the world economy into a recession seem premature. It will be interesting to see if this forces any changes to what the Fed says or does at its meeting on Wednesday (current expectations are for a 0.25% rate cut).

Disclaimer: SIA Wealth Management Inc. (SIAWM) specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIAWM nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.