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March 18, 2025
Morning everyone,
Equity markets caught a bid yesterday despite more weak economic numbers being released. Worth noting that the rally was sold into on the close. Perhaps just short covering?
Energy is moving sideways as conflicting geopolitical trends continue to offset. Attacks on Houthis raise tension but don’t affect any energy infrastructure and the state of ceasefire talks are anyone’s guess at this point.
The ceasefire between Israel and Hamas may be unraveling.
Plus, the recent moves in both crude and nat gas leaves you wondering where the next sellers of crude and buyers of nat gas will come from.
What's in this issue:
Energy Market Recap
Chevron Boosts Hess Bet
Headlines
| Crude Oil (Apr) | $67.58 | +0.40 | +0.60% |
| Natural Gas (Apr) | $4.018 | -0.086 | -2.10% |
| Copper (May) | $4.9590 | +0.0630 | +1.29% |
| S&P 500 | 5,675.12 | +36.18 | +0.64% |
| Dollar Index (DX) | 103.47 | -0.24 | -0.23% |
Energy Markets
🛢️WTI was up .6% on the day, showing what attacks on the Houthis are worth in terms of geopolitical risk - not much.
Declining volume on these moves higher doesn’t exactly inspire confidence.
WTI Spreads
The front spread has narrowed a bit even as the market has rallied the last few sessions. Remember that we approached a flat front spread in each of the last two months as near-term weakness in demand was a concern. Apr/May has been a bit more sticky in the .20-.30 range so far.
Apr/May: +0.21
Jun/Dec: +2.33
Dec5/Dec6: +1.52
🔥 Natural gas prices slid 2.1% as the market is day to day on weather demand. Mild temps early in the week give way to some colder weather later.
Ceasefire talks have the potential to open up flows of Russian gas to Europe, which could affect US LNG demand.
But it’s hard to make a call on this scenario at this point. Coin toss!
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Chevron Boosts Hess Bet
The drama between prom kings Exxon and Chevron continue to play out over belle-of-the-ball, Hess. Just to recap, Chevron has proposed to purchase Hess, mainly to get its hands on it’s stake in the prolific Guyana play.
Exxon has claimed that its right of first refusal to buy Hess’ stake is grounds to block the deal. Chevron is arguing that it isn’t buying the stake, it’s buying the company so nah-nah.
Chevron must be pretty confident in its position. It recently purchased 15,380,000 shares of Hess on the open market, an apparent play that when the deal closes they will realize the discount that they currently trade at to the deal price.
The excellent Bloomberg opinion columnist Matt Levine brings up an interesting point about this. Namely, is it insider trading?
He points out:
“But let’s say that Chevron does have some material nonpublic information that merger arbitrageurs don’t know about. Let’s say Chevron knows some hard facts that make it very confident in the deal closing, and if it disclosed those facts — rather than its generic statements of confidence — Hess’s stock would go up…
The question is not just “do you know something the market doesn’t know” but also “do you have some duty to someone to keep that information confidential and not trade on it?” Here it is not clear. Companies aren’t supposed to trade their own stock while they have material nonpublic information (because they have fiduciary duties to their shareholders), but Chevron didn’t trade its stock; it traded Hess stock.”
Best loophole ever? What do you think?
Headlines
“The problem is that every time the market starts believing that Beijing's efforts to increase growth are bearing fruit, a reality check is delivered in the form of soft data.”
+China's steel and iron ore swing between hopeful outlook and grim reality: Russell - Reuters
“Japan has committed to reduce the trade deficit with us and its reliance on Russia by purchasing U.S. liquefied natural gas. I will hold them to that promise,"
+Alaskan officials to seek investors in Asia as Trump touts LNG - Reuters
"The vehicles for hire, like taxis, will have to find a different kind of car,"
+Toronto excludes Tesla from EV incentive due to US trade war - Reuters
Economic Calendar
Monday - Retail Sales
Tuesday - Housing Starts, Cap U
Wednesday - Crude Oil Storage Report, FOMC
Thursday - Natural Gas Storage Report, Jobless Claims, Existing Home Sales
Friday -