Copyright © Daniel Cullinane CPA.
In its monthly Oil Market Report for January released Friday morning, the International Energy Agency (IEA) said that global crude supplies dropped by 950,000 barrels a day to total 100.6 million barrels a day in December. Year over year, however, supply rose by 2.6 million barrels a day in 2018.
In IEA’s colorful description, “[T]he mood music in the global economy is not very cheerful.” Growth is expected to remain strong in the first half of the year before tailing off. Prospects for future economic growth can drive oil prices up or down as speculators place their bets on the future direction of crude prices.
The December agreement between the Organization of the Petroleum Exporting Countries and its partners (OPEC+) sent prices higher briefly before concerns about the global economy floated up and Brent crude prices fell by $10 a barrel. OPEC+ recently renewed their commitment to the production cuts and, according to IEA data, December production dropped by nearly 600,000 barrels a day. Earlier this month, Saudi Arabia indicated that it will chop production even further in January and in future months.
Calling the rebalancing of the crude oil market “more likely to be a marathon than a sprint,” IEA noted that Russia’s intentions are hazy. Russian production rose to a near-record 11.5 million barrels a day last month. Whether and by how much Russia will slow production in the months ahead has not been made clear.
U.S. crude oil production rose by 2.1 million barrels a day in 2018 and IEA expects an additional increase of 1.3 million barrels a day this year:
While the other two giants voluntarily cut output, the US, already the biggest liquids supplier, will reinforce its leadership as the world’s number one crude producer. By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.
On the demand side, IEA now projects demand growth will reach 1.3 million barrels a day for 2018 and is forecasting additional growth of 1.4 million barrels a day for 2019. Demand from developing countries, including China and India, rose by 1.15 million barrels a day last year, 62% of the global total. Demand from the developed nations of the Organisation for Economic Co-operation and Development is forecast to drop from 390,000 barrels a day in 2018 to 280,000 barrels a day in 2019.
Early Friday morning, West Texas Intermediate crude for February delivery traded at $52.57 a barrel, up about 0.9% compared with Thursday’s closing price of $52.07. Brent crude for March delivery traded up about 0.7% at $61.61 a barrel in London
Stocks were indicated to open higher on renewed trade hopes on Friday. Still, the Dow Jones industrials had rebounded more than 1,500 points from the lows of January 3. Investors have noticed that the prevailing trend of buying the dips generally has been followed by less upside or additional losses, and the volatility late in 2018 shook the confidence of many investors over how to position their assets for 2019 and beyond.
24/7 Wall St. reviews dozens of analyst research reports each day of the week. Our goal is to find new ideas for investors and traders alike. Some of these analyst reports cover stocks to buy, while others cover stocks to sell or to avoid.
Additional commentary has been added on most of the daily analyst reports, along with trading history. The consensus analyst price targets and other valuation metrics are from the Thomson Reuters sell-side research service.
These were the top analyst upgrades, downgrades and initiations seen on Friday, January 18, 2019.
Bank of America Corp. (NYSE: BAC) was reiterated as Buy and the price target was raised up to $33 from $29 (versus a $28.99 prior close) at Jefferies. The consensus target price was $32.22, and the 52-week trading range is $22.66 to $33.05.
BB&T Corp. (NYSE: BBT) was reiterated with a Buy rating and with the same $60 target price (versus a $48.28 close) at Argus.
CarMax Inc. (NYSE: KMX) was downgraded to Neutral from Outperform and the price target was lowered to $60 from $70 (versus a $64.56 close) at Wedbush Securities, with the firm noting that costs and execution risks are on the rise.
Caterpillar Inc. (NYSE: CAT) was maintained as Outperform at Credit Suisse, but the firm lowered its price target to $173 from $183 after its dealer surveys showed that 85% of the dealers are calling for demand to be flat to up 5% while 15% are forecasting flat to down 5%.
Chevron Corp. (NYSE: CVX) was raised to Buy from Neutral at UBS. Chevron closed at $111.96 in a 52-week range of $100.22 to $132.67. The consensus target price is $138.16.
CSX Corp. (NYSE: CSX) was reiterated as Buy with a $71 price target (versus a $65.09 close) at Argus. The independent research firm believes that its new CEO should be substantially lowering the company’s cost structure and that the recent $5 billion stock buyback campaign should signal confidence in its outlook.
Edwards Lifesciences Corp. (NYSE: EW) was raised to Buy from Neutral and the price objective was raised to $190 from $180 (versus a $159.11 close) at Merrill Lynch.
Fastenal Co. (NASDAQ: FAST) was reiterated as Buy with a $64 price target (versus a $57.34 close) at Argus, with the firm noting that it expects positive momentum to continue and that the three recent dividend hikes signal confidence in its outlook.
Fiserv Inc. (NASDAQ: FISV) was raised to Outperform from Perform with an $88 price target (versus a $74.50 close) at Oppenheimer.
Interpublic Group of Companies Inc. (NYSE: IPG) was downgraded to Sector Perform from Outperform and the price target was lowered to $24 from $28 (versus a $22.34 close) at RBC Capital Markets. Shares were indicated down 4.5% at $21.35 on Friday, and the prior consensus target price was $25.77.
Joint Corp. (NASDAQ: JYNT) was started with a Buy rating and assigned a $10 price target (versus an $8.10 close) at D.A. Davidson.
Kimberly-Clark Corp. (NYSE: KMB) was raised to Overweight from Neutral with a $129 target price (versus a $114.37 close) at JPMorgan. It has a consensus target price of $106.94 and a 52-week range of $97.10 to $123.50.
Nautilus Inc. (NYSE: NLS) was seeing its shares battered by over 40% lower to around $6.85 on Friday after guidance was lowered, which will be under the prior 52-week low of $10.04. B. Riley FBR lowered its rating down to Neutral from Buy but slashed its target price to $10 from $21.
Daniel Cullinane CPA
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2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778