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Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect

Takeaway: Our energy policy analyst Joe McMonigle made a big, non-consensus call on Iranian oil production. He was right. Credit where credit's due.

Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect - z joem

 

A reality check is in order.

 

NPR ran a segment over the weekend saying Iran’s dramatic return to crude production and exports is “confounding the experts and beating expectations.” Well, not so much. Iran surprised virtually everyone but us. 

 

As you can see below, Hedgeye Potomac Senior Energy Analyst Joe McMonigle predicted this in his January 17 note, “Iran sanctions relief to trigger crude exports sooner and larger than expectations.” In the note, he advised our subscribers to expect 700,000 barrels per day by March. Iran is now at 800,000 barrels per day and growing.

 

Here's what NPR had to say

“When the nuclear deal between Iran and world powers was implemented in January, it was widely believed it would take at least a year for the country’s oil industry to get back up to speed after years of sanctions. But Iran is confounding the experts and beating expectations.”

 

Here's what we wrote back in January

“The same analysts who were surprised at how quickly sanctions got lifted are now underestimating Iran’s production capabilities, or incorrectly believe Iran will move slowly due to low crude prices. Our view is that Iran will increase production by larger amounts and sooner than most observers think. We anticipate that Iran, by itself, has the capability to produce approximately 700,000 barrels a day of additional crude for export by March 2016.”  

 

“As a result of sanctions, Iran reduced production across the board as opposed to shutting down major upstream fields. Therefore, increasing production in the short-term would be almost like pushing a button. Iran could easily reach 700,000 barrels a day by increasing production by a couple hundred barrels a day at its 2,280 producing wells.”

 

*  *  *  *  *

This is a big deal on an important call that we got right. We were virtually alone in making the call.

 

On a related note, our world-class cartoonist captured our contrarian call later that week on January 22 with this cartoon.

 

Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect - Iran.Saudi.oil cartoon 01.22.2016

 

 


Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 6 14

 

Daily Market Data Dump: Tuesday - sector performance 6 14

 

Daily Market Data Dump: Tuesday - volume 6 14

 

Daily Market Data Dump: Tuesday - rates and spreads 6 14

 

Daily Market Data Dump: Tuesday - currencies 6 14


CHART OF THE DAY: Checking-In On Equity Volatility

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... Oh, and how about that thing called equity volatility?

 

Front month US Equity VIX just went from 13 to 21-22, in a week. Since both the April and June US stock market “rallies” to lower-all-time-bubble highs came on decelerating volume, should this move surprise anyone other than people who chase charts?

 

Or were people chasing moving monkey averages aware of the causal factor called #TheCycle all along?"

 

CHART OF THE DAY: Checking-In On Equity Volatility - 06.14.16 EL Chart


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The Clock Is Ticking: Will Trump Bring The GOP Together?

 

Much is being made of Donald Trump’s inability to unite Republicans at this stage of the campaign. Hedgeye Potomac Chief Political Strategist JT Taylor takes a look and offers some key thoughts on the subject, as well how Hillary Clinton stacks up on the Democratic side.


Cartoon of the Day: Living In A Bubble?

Cartoon of the Day: Living In A Bubble? - Soros cartoon 06.13.2016

 

Last week, hedge fund titan George Soros grabbed headlines after it was announced he had come out of semi-retirement and placed bearish bets, shorting the S&P 500 and buying gold. 


Remember When SF Fed's John Williams Forecasted Up To 5 Rate Hikes In 2016? We Do.

Takeaway: Misguided? Out to lunch? Delusional? You decide.

Remember When SF Fed's John Williams Forecasted Up To 5 Rate Hikes In 2016? We Do. - marketwatch story

 

Five rate hikes in 2016! Yes, five.

 

That was San Francisco Fed head John Williams' call in January of this year.

 

Reality check.

 

Now that the Fed has turned dovish (again), with poor economic data continuing its past peak cliffdive, markets are discounting the probability of any rate hike in 2016 at all. Currently, the market's probability of a hike isn't above 50% until February 2017.

 

Going out on a limb here ... but five hikes look like a stretch (given that there are just five meetings left in 2016). 

 

Click to enlarge

Remember When SF Fed's John Williams Forecasted Up To 5 Rate Hikes In 2016? We Do. - rate hike 6 13

 

Here's an illuminating excerpt from the interview with CNBC's Steve Liesman back in January, in which John Williams discussed his rate hike outlook.

 

LIESMAN: So let's talk about the path for Fed rate hikes this year. The median seems to suggest four this year. Is that also your forecast?

 

WILLIAMS: Well, I think that given the forecast they have for where the economy's going, what's happening with inflation – and inflation is the one thing that we're still struggling to get back to our 2% goal. That to me is the main focus. You know, I think something in that 3 to 5 rate hike range makes sense, at least at this time. But we're data dependent. We continue to be data dependent so the data's suggesting that gradual pace of rate hikes makes sense. But we'll have to re-evaluate that, reassess that, based on where we see inflation and other indicators that kind of are factors in inflation and how we see economic growth over the next year." (Emphasis added)

 

Williams continued saying that, by his estimation, U.S. GDP is headed toward 2% at the end of this year.

 

Delusional? 

 

You decide.

 

(**If you'd like to read more Fed nonsense, here's the full transcript of the interview with links to the video.)


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