US crude production has increased to 8.51 million barrels a day, the highest level since 1986. Nonetheless, big speculators closed out nearly $6 billion worth of bullish bets in U.S. crude oil markets in the week to July 15. So is the oil boom in its waning stages? I don't think so, but it may be due for a rest. Reuters says hedge funds are "capitulating" to growing signs of a surplus of immediately available oil."
Something that might change U.S. oil output: California officials have ordered an emergency shut-down of 11 oil and gas waste injection sites and a review more than 100 others in the state's drought-wracked Central Valley. This is drought-related. See agriculture below.
As the song says, "It never rains in California, but girl, don't they warn ya."
In more scientific terms: "The 2014 drought is responsible for the greatest absolute reduction to water availability for agriculture ever seen"
Earnings and Markets
73% of S&P companies have beat revenue estimates thus far, a new record high. This week, nearly 30% of the S&P are reporting earnings and 40% of the Dow-30.
Here is the latest bullish case for the markets:
The fundamentals we focus on remain the lack of any return on cash and generally low market and economic volatility. Incoming economic data and surveys are raising our confidence that global and US growth is set to rebound to a 3% handle in H2, after a dismal and unexplained weak H1.Also, we just saw the best jobless claims report in 7 years.
Deficit? What deficit?
On the other hand, one of the most profitable companies in tech just laid off 18,000 people for no good reason.
Here's the gold chart of the day
Farmers in India seem to be catching gold fever again. We'll see how this impacts the gold market down the road.
The Freakin' Plane
One of the things that bothered me over the weekend was why that Malaysian airliner was flying over a war zone. It turns out airlines fly over regions torn by war all the time for a very simple reason: To save money. In fact, there are airlines flying regular routes over Afghanistan and other war zones regularly right now. I don't think that will make the relatives of the Malaysian flight feel any better. Nor will it help the relatives of the next flight to go down because an airline decided to save a few bucks.