Oil could fall toward $20, but not for the reason you think

By William Watts Published: Jan 11, 2016 10:21 a.m. ET It’s more about the dollar than a global glut of crude The world’s awash in oil, but that’s not what’s driving crude toward $20 a barrel.The oil-in-the-$20s club just got a new member. But Morgan Stanley’s case for another leg lower has less to do with a global glut of crude than it does with a strengthening U.S. dollar. In a Monday note by analysts including Adam Longson, head of energy commodity research, Morgan Stanley argues that traders have put too much of the blame for recent weakness in commodities, especially oil, on market fundamentals. Instead, they contend that the primary driver over the last several months has been a strengthening U.S. dollar. Oil futures last week tumbled to their lowest levels in more than a decade, extending a selloff that has seen West Texas Intermediate crude CLG6, +2.40% the U.S. benchmark, and Brent LCOG6, +2.28% the global benchmark, drop by around 70% from their mid-2014 highs. And with China likely to further devalue its yuan currency and the Federal Reserve in tightening mode, further dollar strength seems likely, the analysts said. While oil markets are undoubtedly oversupplied, after a certain point, deteriorating fundamentals have little to do with the price action. “Oversupply may have pushed oil prices under $60, but the difference between $35 oil and $55 oil is primarily the USD (U.S. dollar), in our view,” they wrote. That’s because there is “no intrinsic value” for crude oil in an oversupplied market, they argued: The only guide posts are that the ceiling is set by producer hedging while the floor is set by investors and consumer appetite to buy. As a result, nonfundamental factors, such as the USD, were arguably more important price drivers in 2015. In fact, when we assess the [more than] 30% decline in oil since early November, much of it is attributable to the appreciation in the trade-weighted USD (not the DXY). With the oil market likely to remain oversupplied throughout 2016, we see no reason for this trading paradigm to change. Share   So given the prospect for further dollar appreciation, scenarios with oil in the $20 to $25 a barrel range are possible “simply due to currency”, they write. They calculate that a 15% devaluation of the yuan would boost the trade-weighted dollar by 3.2%. In turn, that could send oil down by 6% to 15%, or $2 to $5 a barrel,” they said, which would leave crude in the high $20s. If other currencies move as well, the move could be even more pronounced, they said. Bank of America Merrill Lynch analysts on Monday also said oil prices could drop below $30 and offered the dollar as one reason. They lowered their 2016 forecast for the average price of the U.S. benchmark to $45 a barrel from $48, and cut their Brent call to $46 a barrel from $50. ========================================================= CDC, local health departments implementing a plan to monitor people exposed to new bird flu strain in Indiana Top News Fri Jan 15, 2016 | 2:18 PM EST Wall Street hammered; S&P 500 hits lowest since Oct 2014 A trader speaks on the phone on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. REUTERS/Brendan McDermid A trader speaks on the phone on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15... Reuters/Brendan McDermid + Traders work on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. REUTERS/Brendan McDermid Traders work on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. Reuters/Brendan McDermid Traders work on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. REUTERS/Brendan McDermid Traders work on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. Reuters/Brendan McDermid A trader speaks on the phone on the main trading floor of the New York Stock Exchange shortly after the opening bell of the trading session in New York, January 15, 2016. REUTERS/Brendan McDermid Reuters/Brendan McDermid Reuters/Brendan McDermid › Wall Street hammered; S&P 500 hits lowest since..By Abhiram Nandakumar (Reuters) - U.S. stock indexes notched deep losses in volatile trading on Friday, with the S&P 500 hitting its lowest since October 2014 and the Dow losing more than 500 points, as oil prices dived below $30 per barrel. All 10 major S&P sectors were in the red and all 30 Dow components lower. The Russell 2000 small-cap index fell as much as 3.5 percent to its lowest since July 2013. The beaten-down energy sector's 4.43 percent slide led the declines, as oil prices fell 6.5 percent. The technology sector was down 4.31 percent, as Intel's weak report weighed heavily on chip stocks. "Investors are scared to death, and the fact that it's happening at the beginning of year has some historical significance," said Phil Orlando, chief equity market strategist at Federated Investors in New York. At 13:01 p.m. ET (1801 GMT), the Dow Jones industrial average was down 448.5 points, or 2.74 percent, at 15,930.55. The S&P 500 was down 52.35 points, or 2.72 percent, at 1,869.49. The Nasdaq Composite index was down 159.40 points, or 3.45 percent, at 4,455.60. The three main indexes were set to test their percentage declines on Aug. 24 when the market plunged after China devalued the yuan. The S&P 500 has fallen 13 percent and the Dow 13.7 percent from their highs in May, pushing them into what is generally considered as 'correction territory'. The CBOE volatility index jumped as much as 29.2 percent to 30.95, it's highest since September. "When we started off the year, we were at the crossroads of concern and optimism and clearly, we've gone down the road of concern pretty quickly," said Dan Farley, regional investment strategist at U.S. Bank Wealth Management in Minneapolis. Dow components Exxon and Chevron were down 2.5-4 percent, while Caterpillar dropped 4.4 percent. Intel tumbled 10 percent to $29.48, its steepest drop in seven years, after the chipmaker's results and forecast raised concerns about its growth. That weighed on the chip index, which fell 5.8 percent, its steepest drop since March. Citigroup was down 7.5 percent at $41.99, while Wells Fargo fell 4.6 percent to $48.29, after reporting largely in-line quarterly earnings. Wynn Resorts was the among the very few bright spots, rising 7.4 percent to $55.29 after reporting in-line of quarterly revenue. U.S. economic data on Friday was also not very encouraging, with an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth. "It depends on where we close today, but things could get worse before it gets better," said Art Hogan, chief market strategist at Wunderlich Securities in New York. Declining issues outnumbered advancing ones on the NYSE by 2,850 to 240. On the Nasdaq, 2,527 issues fell and 289 rose. The S&P 500 index showed no new 52-week highs and 135 new lows, while the Nasdaq recorded four new highs and 477 lows. (Reporting by Abhiram Nandakumar and Tanya Agrawal in Bengaluru; Additional reporting by Dion Rabouin in New York; Editing by Savio D'Souza) Wall Street hammered; S&P 500 hits lowest since...X Next In Top News Photo Iran oil headed for India, Europe, with sanctions lifting Trending Stories 1 Wal-Mart pulls plug on smallest store format, shuts 269 stores 2 French drug trial disaster leaves one brain dead, five injured 3 Friendly no more: Trump, Cruz erupt in bitter fight at Republican debate 4 Winners of $1.6 billion Powerball jackpot still unknown 5 Tennessee couple claim winning ticket for U.S. Powerball jackpot: NBC RECOMMENDED STORIES SPONSORED CONTENT Follow Us On Twitter Follow Us On Facebook Follow Us On LinkedIn Follow Us On Google+ Follow Us Via RSS Subscribe to Newsletters | Download our Apps Feedback | Advertise with Us | Site Index | Terms of Use | Privacy Policy | Ad Choices News and Media Division of Thomson Reuters Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here. © 2016 Reuters All Rights Reserved

Apple iPhone 6 pre-orders hit record 4 million on first day

https://www.youtube.com/watch?v=eGxlm82hWDM Apple to unveil new iPads, operating system on Oct. 21: report Wed, Sep 17 14:40 PM EDT image (Reuters) - Apple Inc (AAPL.O) is set to launch two new iPads and release the next version of its Mac operating system at its next event on Oct. 21, a Daily Dot report said, citing sources familiar with the matter. The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is expected to have a 9.7 inch screen, while the new version of the iPad mini will have a 7.9 inch screen, Bloomberg earlier reported, citing people familiar with the matter. A Bloomberg report said the Cupertino, California-based company will launch its next generation of iPads around mid-October as Apple prepares for the holiday season by boosting its product lineup. Apple sold 13.3 million iPads in the quarter ended June, falling short of analysts' projections for more than 14 million. Apple also unveiled its Apple Watch, two larger iPhones and a mobile payments service dubbed "Apple Pay" last week. (Reporting by Anya George Tharakan in Bangalore,; Additional reporting by Christina Farr; Editing by Joyjeet Das) ============================= Mon, Sep 15 19:48 PM EDT image 1 of 4 By Lehar Maan (Reuters) - Apple Inc said many customers will need to wait until next month for their new iPhones after a record 4 million first-day pre-orders were logged, double the number for the iPhone 5 two years ago. The company said demand had outstripped supply of the new iPhone 6 and iPhone 6 Plus, which feature larger screens and longer battery life. Deliveries of pre-orders will begin on Friday and will continue through October. Bumper first-day pre-orders point to first-weekend sales of up to 10 million units, analysts estimated. "Assuming preorders are similar to the 40 percent of first weekend sales for the iPhone 5, this would imply iPhone 6/6Plus first weekend sales could be around 10 million," Wells Fargo Securities analysts wrote in a note. About 2 million pre-orders were received for the iPhone 5 in the first 24 hours after it went on sale in September 2012. Apple sold 5 million of these phones in the first weekend. Apple sold 9 million iPhone 5Ss and 5Cs, which were launched last year, in the first three days in stores. The company did not reveal pre-order numbers for these phones. Raymond James analysts said they expect sales of iPhone 6 and iPhone 6 Plus to top 9 million in the first weekend. "Apple will be selling every iPhone it can make, at least through October. Because of this, the first weekend sales are typically more indicative of supply than demand," they said. The company routinely grapples with iPhone supply constraints, particularly in years that involve a smartphone re-design. Apple's website showed last week that the larger 5.5-inch "Plus" models displayed a wait time of up to a month. The 4.7-inch version was available for delivery on Sept. 19. Janney Capital Markets analysts said the large number of pre-orders was due to "pent-up demand" for bigger iPhone screens. The brokerage raised its sales estimate for the latest iPhones to 37.4 million units for the current quarter and 60 million for the quarter ended December. "We believe significant demand will even spill into the March and June quarters given supply and the timing of shipments in China," Barclays analysts wrote in a note. The company said the new iPhone models will be available to customers in its stores in the United States, Canada, Australia and some other countries on Friday morning. AT&T Inc, Sprint Corp, T-Mobile US Inc, Verizon Wireless and some Apple authorized resellers will also start selling the phones on Friday. The phones will come equipped with Apple's new payments service, "Apple Pay", which launches in the United States next month and allows users to pay for items in stores with their phones. Apple's shares were up less than 1 percent at $102.92 Monday afternoon. (Reporting By Lehar Maan and Soham Chatterjee in Bangalore; Editing by Saumyadeb Chakrabarty)