4 December 2020

1) Exxon has announced that it will dramatically mark down the value of its natural gas properties, a result of the slow oil price recovery. The plan is to take a non-cash charge of $17 to $20 billion dollars, which is a massive hit for a company who has long opposed to taking writedowns. Exxon erred when it acquired XTO Energy, a natural gas giant, for $41 billion dollars in late 2009. Now, about half of that purchasing value has now been erased. The natural gas market is depressed with the price of gas now less than half of what it was when Exxon purchased XTO Energy. Other oil companies such as Chevron, BP and Shell have also taken massive write downs. This write down also means that Exxon will limit its near term capital spending in gas

2) Failed talks have exposed a dangerous fissure at OPEC’s core, which its partners are quietly working to repair. Diplomatic efforts center around Saudi Arabia and the United Arab Emirates on how much crude oil to pump in the coming new year. OPEC rescued the oil market this year, after an unprecedented slump in oil prices, by slashing production to compensate for the demand decline because of the pandemic. But with oil prices down for so long, many OPEC member countries life blood revenues are down which impairs operations of those governments. This puts a lot of pressure on individual countries to break away and pump without any restrictions or quotas to get the monies they need. Privately, some OPEC members are talking about even leaving the cartel and going their own way with oil.

3) During the Thanksgiving holiday week, fewer Americans applied for unemployment benefits, thereby reversing an uptick in jobless claims over the previous two weeks. But still unemployment claims remain historically high, indicating many companies are continuing to lay off workers, despite the economy recovering from the impact of the coronavirus. Some 712,000 people applied for unemployment benefits, a drop of 75,000 from the week before. Another 288,000 applied for Pandemic Unemployment Assistance, a special program for self-employed and gig workers, as well as others who don’t qualify for regular state unemployment. In addition, millions are struggling to find work during the pandemic. All told, about 20 million people are now receiving some type of jobless aid, with 12 million set to lose their benefits the day after Christmas unless Congress agrees to extend funding.

4) Stock market closings for – 3 DEC 20:

Dow 29,969.52 up by 85.73
Nasdaq 12,377.18 up by 27.82
S&P 500 3,666.72 down by 2.29

10 Year Yield: down at 0.92%

Oil: up at $45.64

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