Daniel Cullinane CPA
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n its Monthly Oil Market Report for August, released Monday morning, the Organization of the Petroleum Exporting Countries (OPEC) noted that the cartel’s average price for its reference basket rose by five cents to $73.27 a barrel in the month of July. Year to date, OPEC’s reference basket is up $19.38 per barrel compared to the same period in 2017.
The cartel said OPEC production in July, as reported by secondary sources, rose month over month by 41,000 barrels a day to a daily average of 32.32 million barrels. Saudi Arabia’s July production fell to 10.387 million barrels a day, a month-over-month decrease of about 53,000.
The Saudis themselves reported total production of 10.288 million barrels a day in August, down by about 201,000 compared to July. Under the production cuts initiated in January, Saudi Arabia’s quota is 10.058 million barrels a day.
In June the Saudis raised production by more than 400,000 barrels a day, and the August cutbacks follow a July agreement between the cartel and its partners, including Russia, to increase production. Even with the July cutback, Saudi Arabia’s output remains higher than the 2017 yearly average and higher than either the first or second quarter average this year. Production from Nigeria and Iraq more than made up for the Saudi’s July output reduction.
Global demand is forecast to average 98.83 million barrels a day in 2018, down by 20,000 barrels. The current estimate for 2019 global demand is 100.26 million barrels a day, down by 30,000 from last month’s estimate.
Global demand growth for 2018 was forecast at 1.64 million barrels a day, down by 10,000 from the prior month’s estimate. The cartel’s projected demand growth for 2019 is now 1.43 million barrels a day, down by 20,000 since last month’s report.
The cartel estimated 2018 non-OPEC supply rose by 73,000 barrels a day to 59.62 million. For 2019, non-OPEC supply is expected to rise by 2.13 million barrels a day to an average of 61.75 million, an increase of 30,000 barrels a day compared with last month’s estimate.
U.S. production growth in 2018 is now expected to rise by 1.69 million barrels a day, down by 10,000 from last month’s forecast. The cartel’s estimate of U.S. in 2019 also slipped slightly from 17.5 million barrels a day to 17.44 million.
2018’s estimated demand for OPEC crude was unchanged at 32.9 million barrels a day, down by some 600,000 compared to 2017. Demand in 2019 is now estimated at 32 million barrels a day, down by around 800,000 from the 2018 level and by 200,000 compared to last month’s estimate.
Crude prices were lower Monday morning, with West Texas Intermediate for September delivery trading down about 0.4% at $67.33. Brent crude for October delivery traded up about 0.1% at $72.71.
he Congressional Budget Office forecast a massive balloon in the number of Americans without insurance if Obamacare repealed. The number of uninsured would rise by 27 million in 2020. The Republican effort to repeal the legislation has failed so far this year.
According to the announcement of the findings:
CBO and the staff of the Joint Committee on Taxation (JCT) have completed an estimate of the direct spending and revenue effects of the Obamacare Repeal Reconciliation Act of 2017, an amendment in the nature of a substitute to H.R. 1628, which would repeal many provisions of the Affordable Care Act (ACA). According to the agencies’ analysis, enacting the legislation would decrease deficits by $473 billion over the 2017-2026 period (see figure below).
CBO and JCT estimate that enacting the legislation would affect insurance coverage and premiums primarily in these ways:
The number of people who are uninsured would increase by 17 million in 2018, compared with the number under current law. That number would increase to 27 million in 2020, after the elimination of the ACA’s expansion of eligibility for Medicaid and the elimination of subsidies for insurance purchased through the marketplaces established by the ACA, and then to 32 million in 2026.
Average premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by roughly 25 percent—relative to projections under current law—in 2018. The increase would reach about 50 percent in 2020, and premiums would about double by 2026.
In CBO and JCT’s estimation, under this legislation, about half of the nation’s population would live in areas having no insurer participating in the nongroup market in 2020 because of downward pressure on enrollment and upward pressure on premiums. That share would continue to increase, extending to about three-quarters of the population by 2026.
The fate of Obamacare has become one of the most divisive issues between Republicans and Democrats since the general election. President Trump first tried to replace it, and, when this failed, repeal it. Neither effort came close to completion.
The Food and Drug admin will launch a plan to tackle high drug prices. FDA Commissioner Scott Gottieb aims to pare back generic drug regulations for faster approval, since generics cost 80% to 85% less, on average. Among the new initiatives set to be announced in the next few weeks: Cutting the backlog of generic drug applications pending at the agency with more guidance on how to apply properly and get approved on the first go round. Modernizing the regulatory process for "complex drugs" so that generics are easier to develop which could lead to more generic inhalers, injectors etc. Keeping brand name firms from denying theri drugs to manufacturers, since makers of generics need access to the products to create their own versions.
REPEAL OF OBAMACARE
Home Depot Inc. (NYSE: HD) reported second-quarter 2018 results before markets opened Tuesday. The home improvement superstore posted diluted net earnings per share of $3.05 in the quarter, on revenues of $30.5 billion. In the same quarter last year, the company reported EPS of $2.25 and revenues of $28.11 billion. Consensus estimates had called for EPS of $2.84 and revenues of $30.03 billion for the latest period.
In a sharp reversal from first-quarter results, same-store sales rose 8.0% globally and 8.1% in the United States. Same-store sales growth badly missed estimates in the first quarter, coming in at 4.2% globally and just 3.9% in the United States. The second quarter produced far better results.
Second-quarter results were good enough that the company now says it expects full-year sales growth of 7.0% and same-store sales growth of around 5.3%. Home Depot also raised its full-year EPS estimate from $9.31 to $9.42.
A tight and expensive housing market does not encourage current homeowners to trade up. Instead, they tend to stay put and remodel or renovate. There is little indication that this situation will change this year, and that is good news for Home Depot.
CEO Craig Menear said:
We were very pleased with our record second quarter sales and earnings. Not only did our seasonal business rebound from the first quarter, but our overall results exceeded our expectations. These results exemplify the outstanding execution of our combined team of store associates, merchants, suppliers and supply chain.
Cost of sales rose 7.8% to $20.1 billion and operating expenses were up 9.3% to $5.46 billion. Operating income rose year over year by 9.8% to $4.9 billion. Net profit grew 31.2% to $3.51 billion.
Customer transactions rose 3.1% to 455.4 million, but the average ticket increased by 5% to $66.20. Sales per square foot rose 8.6% to $504.20.
The stock traded up about 2.2% in Tuesday’s premarket session at $198.35, in a 52-week range of $146.89 to $207.61. The 12-month consensus price target on the shares is $212.55.24/7 Wall St.
OPEC LIFTS PRODUCTION