Commodities Today: Iran And Nigeria Weigh On Oil Markets, Natural Gas A Bright Spot

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Includes: CVX, RDS.A, RDS.B, RIG, UNG, USO, XOM
by: Matthew Smith

Summary

Natural gas prices are rallying today as all other major commodities we follow are in the red.

Both Brent and WTI Crude are lower on the session, as it appears a deal was reached with Iran and Nigeria has been peaceful after its election.

RIG is scrapping more rigs as the industry tries to balance supply with demand.

Oil prices have taken a hit after a press conference was called for later today with both Western diplomats and Iranian diplomats to be present. Brent oil fell by more than 4% on that news item and dragged down the entire oil complex. The United States Oil ETF (NYSEARCA:USO) is now marginally lower, but the oil equities themselves are still trading higher for the most part.

While we were correct that oil was not to be bought on yesterday's bullishness, there are two items which worry us about our call. First, oil equities are trading higher, which, if we are being honest, is the opposite direction we expected, and second is that even with these breaking news stories discussing a deal having been reached with Iran, the United States does not want to disclose exactly what's in the agreement. Now, we are not a far right Republican or a Tea Partier, but this preliminary agreement, which is supposed to pave the way to and provide the framework for an accord, sounds an awful lot like the Affordable Care Act, also known as Obamacare. With the ACA, lawmakers had to approve a bill to see what was in it, and here diplomats are agreeing to a deal that no one can know about. How can a country effectively manage its foreign affairs if everyone refuses to disclose exactly what was agreed to thus far? So much for being transparent.

Chart of the Day:

Natural gas and the United States Natural Gas ETF (NYSEARCA:UNG) are higher on the session after the natural gas inventory numbers showed that 18 billion cubic feet of natural gas was taken out of storage. In today's market, traders are taking what they can get, and today, they are aggressive bidders on natural gas.

Source: CNBC

Commodity prices are as follows (at time of submission):

  • Gold: $1,200.00/ounce, down by $8.20/ounce
  • Silver: $16.675/ounce, down by $0.384/ounce
  • Oil: $48.84/barrel, down by $1.25/barrel
  • RBOB Gas: $1.7597/gallon, down by $0.0715/gallon
  • Natural Gas: $2.712/MMbtu, up by $0.107/MMbtu
  • Copper: $2.732/pound, down by $0.0165/pound
  • Platinum: $1,152.00/ounce, down by $10.00/ounce

Transocean Scrapping More Rigs

Investors are cheering Transocean's (NYSE:RIG) decision to scrap two more rigs today, bringing its total over the last month or so to 6 rigs. In total, the company now has plans to scrap a little under 20 of its rigs. This is good news for the company and the industry, but it still leaves a lot of capacity in the deepwater. We think that further cutting will be required, especially as deepwater drilling projects are scrapped or delayed with the oil company cutting capital expenditures.

Transocean will take a non-cash charge of no more than $110 million related to the plan.

Nigeria's Peaceful Power Exchange

For those who follow the oil markets closely, Nigeria has always been a hot spot. The country has a plethora of riches to unite it, but far too many differentiating factors that the Nigerians let get in the way of true progress. There are arguments over oil rights, how funds are distributed, tribal feuds, and of course Boko Haram, just to name a few. The thieving is another problem which when combined with all of the above has driven companies such as Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) and Exxon Mobil (NYSE:XOM) batty.

Nothing is ever done in this country without someone getting upset and causing a show, which is why we were surprised to learn that thus far everything has been quiet in Nigeria. Once again the country is seeing a Northerner ascend to the Presidency and replace a Southerner, but even with that big geographical difference, it seems that the country, as a whole, is focusing on solving the real problem (Boko Haram) rather than fighting amongst one another.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.