Above the Fold

Crude Rude Awakening?

The price of oil touches so many aspects of our daily lives. Ironically, its cost is often representative of global economic health, even though its somewhat manipulated price can also trigger slowdowns if too high. And while the 14 countries that comprise OPEC (The Organization of the Petroleum Exporting Countries) have long dictated what the world pays for black gold, their power is diminishing. Its main adversary is not only the world’s largest consumer of oil (20% of all oil used), but now the globe’s largest as well, the United States. China is second, guzzling roughly 13% of total supply.

Pumping out nearly 18 million bpd (barrels per day), the U.S. was responsible for 18% of total production in 2018, 6% more than our closest competitor, Saudi Arabia. All told, producers process more than 100 million bpd.

Oil prices hit a 3-month high recently on the heels of U.S.-China trade deal 1.0, and promised cuts by OPEC and Russia-led allies — a total of 24 nations. But OPEC’s “promised” cuts often don’t come completely to fruition and many are, frankly, misleading. The recent cuts will restrict a total of roughly 1.7 million barrels a day from oil markets, deepening the current curb of 1.2 million barrels a day (both small in the grand scheme of things). 

But many countries, like Saudi Arabia, are already below their current production quotas, and some countries, like Russia, have production exemptions, allowing them to deliver unlimited propane and butane (which are also used for heat and fuel). There’s also a plethora of infighting between OPEC nations, and many depend on crude sales to sustain their fragile economies — too deep a cut, and budget shortfalls become all too common. 

With slowing demand across the globe expected, and the OPEC “cuts” maybe not becoming much of a cut at all, the rally from the low $50s to crude’s current level of $60 may have a tough time sustaining itself. 

Three Things

1. Deeper Issues for the MAX – As the Boeing 737 MAX grounding stretches to nearly 10 months, the company is now considering a pause or complete end to production. A halt or change in production could trigger major financial impacts for the company and the U.S. economy, as the company had orders for more than 5,000 and each plane retails for more than $100 million. 
2. Uber Abandoning Indian Food? – As it works toward profitability, the parent company of Uber Eats is reportedly selling its food delivery service in India to rival Zomato Media Pvt. Ltd. The company has either sold to or invested in local competitors before, both in Southeast Asia and Russia. Analysts expect the India deal to save the company $500 million in annual losses. 
3. Brexit Might Be a Sure Thing (No, Really) – After winning a historic, landslide vote, UK Prime Minister Boris Johnson’s conservative party took over the largest majority in 30 years and is now set to complete Brexit by the Jan. 31 deadline. The PM promises to “unite” the UK as the country moves forward with this notable exit from the European Union. 

Did You Know?

Giving, Getting and Returning During the Holidays

According to the National Retail Federation, the average person will spend about $1,050 on holiday gifts and travel this season. Americans in the Northeast tend to splurge the most, dropping more than $1,300 on holiday joy, while Southerners spend the least, around $950. And if you were wondering, pets usually garner an average of $62 in holiday spending.

Unfortunately, not all presents are cherished forever. According to a recent Oracle survey, 77% of Americans plan to return some of their gifts and nearly 20% are likely to return at least half of the gifts received. Make sure you check the return policy on that gift receipt as retailers often have special holiday policies. Most of us don’t wait very long, as a separate survey revealed that Dec. 26 was the most popular day for returns, followed by Jan. 2.