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Oil prices plunged 4 percent on Wednesday, ending the longest bullish streak in five years, as more evidence indicated OPEC exports rose last month.
U.S. West Texas Intermediate crude futures ended the session down $1.94, or 4.1 percent, at $45.13 per barrel, erasing much of the previous two sessions' gains. International benchmark Brent crude futures slumped $1.85, or 3.7 percent, to trade at $47.76 per barrel 2:37 p.m. ET.
WTI prices rose nearly 11 percent from a 10-month closing low over the course of eight sessions, the contract's longest winning streak since 2012.
"We're in no man's land as this tug of war of this rebalancing act continues to play out," Jeff Kilburg, founder and CEO at KKM Financial, told CNBC's "Futures Now." He said he expects U.S. crude prices to remain stuck in a range of $42 to $47 a barrel.
WTI crude futures, source: Factset
Bearish sentiment crept back into the market on Wednesday after data from Thomson Reuters Oil Research showed OPEC's exports rose in June. This was despite the producer group reaching an agreement in May to extend a deal to keep 1.8 million barrels a day off the market in order to shrink global supplies and end a three-year glut.
OPEC exported 25.92 million barrels per day in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier, according to Reuters data.
CNBC reported last week that shipments from top oil exporter Saudi Arabia and other OPEC members were on the rise in June, citing analysis by tanker tracking firm ClipperData.
OPEC and other oil exporters including Russia have entered a seventh month of production cuts, but analysts remain concerned that exports have not fallen as quickly as output this year.
"Everyone continues to fight for market share and not necessarily constrain supply to the global market, and that realization I think has registered today," said John Kilduff, founding partner at energy hedge fund Again Capital.
Saudi Arabian state oil giant Saudi Aramco on Wednesday said it would cut prices for light crude grades to customers in Asia in August, a sign of rising competition in the key demand hub.
"That indicates that the production scheme is just not helping prices," Scott Nations, chief investment officer at NationsShares, told "Futures Now."
A report that Russia has ruled out deeper production cuts also weighed on markets, Nations said. Russia is the largest non-OPEC contributor to the output cut deal.
Some analysts on Wednesday said oil prices were poised for a fall after the sharp rise through Monday. They said the surge was driven by traders closing out short positions, or bets that oil prices would fall.
"We had a frothy move higher driven by short covering as negative bets had gotten nearly as high as they had been when oil was at its lows last year, so we were bound to see a bit of a reversal with traders taking profits ahead of tomorrow's inventory report," Tamar Essner, director, of energy and utilities at Nasdaq Corporate Solutions, told CNBC in an email.
Traders are awaiting the latest data on U.S. crude stockpiles on Thursday, which are delayed by one day due to the July 4 holiday. Analysts expect stocks to fall by 2.8 million barrels, according to a Reuters survey.
A painful correction is coming and there's little that can be done to prevent it, according to former Republican congressman and libertarian firebrand Ron Paul.
Speaking to CNBC last week, the former GOP presidential contender argued the economy is not as strong as Wall Street consensus believes, and the situation could turn ugly as soon as October.
"If our markets are down 25 percent and gold is up 50 percent it wouldn't be a total shock to me," said Paul recently on "Futures Now."
Paul, who's also a medical doctor and former U.S. Representative from Texas, is a well-known bear who has been sharply critical of Trump administration. He has also been putting a lot of blame on the Federal Reserve for keeping interest rates historically low for so long.
Although the Fed is undertaking a rate hike campaign after nearly a decade of ultra-accomodative monetary policy, some believe asset prices—and the economy—could still react badly.
"I think it's a very precarious market, and the Fed better be very careful. Since they are incapable of knowing what to do, I don't expect much good to come out of anything they do," said Paul. "There are so many mistakes made out there that the correction is almost unlimited."
This is not the first time Paul has called for a pullback on "Futures Now."
He made a similar prediction almost exactly a year ago on June 28, 2016, almost exactly a year ago. Since then, the S&P 500 has ripped by 21 percent and the Dow is up 24 percent, breaking several records along the way. The tech heavy Nasdaq bounced into record territory over that time period, and soared 34 percent.
However, Paul still makes the case that the rally is on borrowed time.
"People have been convinced that everything is wonderful right now and that stocks are going to go up forever," Paul said.
"I don't happen to buy this. The old rules always exist, and there's too much debt and too much mal-investment. The adjustment will have to come," he added.
The market has had a quiet start to the summer, but the doldrums may be about to give way to some serious fireworks, with new record highs potentially on the way.
So said Stephen Suttmeier, a chief equity technical strategist with Bank of America Merrill Lynch. Last July, Suttmeier identified a "very rare" signal in the markets that he said would bring the S&P 500 Index through 2,400.
This time, he's calling for the S&P to reach 2,500 or even higher, a 3 percent rally from Friday's levels. And it's all going to happen this month, according to the charts.
"We're right into support right now at around 2,418 to the 2,400 level," he said last week on CNBC's "Futures Now." He added: "I think that if we can hold that, we can see a move towards 2,475 and maybe even 2,500 or 2,550 in July."
Suttmeier noted the rally should come as no surprise as data going back to 1928 has shown that the markets typically sees an average gain of 1.5 percent in July.
"I would only start to get nervous if the S&P got below 2,400," he mentioned. "It would probably get quickly oversold somewhere north of 2,500 or 2,550, but I think we're re-testing the breakout point right here right now. That call into 2,500-plus in July remains intact."
Despite falling below its 50-day moving average on Thursday, the S&P 500 is still on pace for its 7th straight positive quarter. A big contributor to the market rally in June has been the financials, with the sector having its best month since November.
Spring wheat futures soared more than 3 percent on Friday as drought worsened in a key growing region.
"Wheat conditions are at some of the lowest ratings in over a decade," said James Cordier, president and head trader at Optionsellers.com in Tampa, Florida.
A major drought in the Dakotas has caused spring wheat crop conditions to decline sharply in the past four weeks. That has lowered expectations for the spring wheat, a high protein grain used in artisan wheat foods like hearth breads, rolls and even pizza crust.
The U.S. Drought Monitor said Thursday that "much needed rainfall was unfortunately scarce over the [High Plains] region during the past week" and noted that a heat wave caused conditions to worsen in many areas. The monitor also showed "extreme drought" conditions expanding across the Dakotas and into Montana, which last year was the nation's third-highest state for planted wheat acres.
"Wheat conditions in the United States started deteriorating in May and the beginning of June, and that began the rally," said Cordier. "The chance for wheat conditions to improve in July and August seem very slim."
July hard red spring wheat, which is traded on the Minneapolis Grain Exchange, rose about 3.6 percent on Friday, a day after surging 5 percent. The contract is sitting at a three-year high and soared 34 percent in June, posting its best monthly gain since 2010.
The Chicago-traded July soft white winter wheat, meanwhile, jumped more than 6 percent on Friday and crossed above $5 per bushel for the first time in a year. For the week, the wheat contract was up 11 percent.
"We've seen the small speculators coming in and buying Chicago wheat," said Ted Seifried, chief marketing strategist with the Zaner Group in Chicago. "You also had a fairly large fund short position there, which they're starting to cover a bit more aggressively now that we've broken out to the upside on the chart."
A new crop progress report is scheduled for release Monday by the U.S. Department of Agriculture and could be another catalyst for higher prices, traders said.
"We'll probably [see] conditions deteriorate again on Monday," said Cordier. "So then the market rallies a little more next week. But Thursday and Friday you probably might look to take profits on it."
According to the June 26 USDA report, the ratings for spring wheat crop conditions were worse than analysts expected.
"Spring wheat crop conditions have dropped about 40 percent in the last four weeks," said Seifried. "The crop is burning up and it's not going to produce anywhere near what we were expecting."
Still, Seifried said the fundamentals on wheat are still "pretty bearish from a global scale on Chicago wheat and even Kansas City wheat for that matter."
Indeed, there's still a big carry-over of unsold wheat from previous harvests, with the vast majority of it Chicago wheat, according to Seifried.
"Our carry-over is about half of what we plan to grow next year," he said. "So we have about 50 percent of a normal crop in waiting just sitting there."
By comparison, Seifried said there's "just not a whole lot of very good quality wheat like the Minneapolis spring wheat. That wheat can really gain value very, very quickly and might have more upside potential."
Wheat is the nation's third-largest crop, after corn and soybeans, and globally ranks as the second-most used crop for food, after rice.
Spring wheat gets planted in April and May in the U.S. and typically harvested in August and September. The crop is most vulnerable to stress during its pollination stage in June and July.
Clearly, the continued ongoing drought conditions could represent further downside risk to yields at harvest. And experts don't see any let-up in the unfavorable conditions.
"The heat continues to build across the nation's midsection, and the prospects for rainfall across the drought areas of the Dakotas and Montana do not look very good over the next two weeks," said Brad Rippey, a meteorologist at the USDA. In addition to above-normal temperatures, he said the outlook also is for below-normal rainfall for the next few weeks.
The Nasdaq 100 broke a historical win streak, and according to one technical analyst, investors may have to brace themselves for a possible correction.
Tuesday on CNBC's "Futures Now," Pension Partners' director of research, Charlie Bilello, pointed out that the Nasdaq 100 had been trading above its 50-day moving average for 138 consecutive trading days, which is the index's longest win streak above that trend line ever. But Bilello also mentioned that it didn't change the fact that "some signs of potential weakness" were creeping up in the market.
"We're looking at things like the yield curve aggressively flattening, we're looking at inflation expectations falling and we're starting to see some weakness in the credit markets," he said. "Within the Nasdaq 100 we're seeing the semiconductor stocks, which have been the leaders for a long time now, starting to weaken."
At Tuesday's close, it seemed that some of those signs played out and dragged the Nasdaq 100 below that 50-day moving average, breaking the streak. Later that day, Bilello put out a note detailing what usually occurs when such a streak in the index breaks.
"Most of the time, there's a pullback or correction, which is followed shortly thereafter by new highs," he wrote. "We saw this in 2011, 2003, 2014, 2006, and 2007. In 2005, a deeper correction ensued which took some time (11 months) to reach new highs again."
In other words, it's likely that a correction is coming, though Bilello thinks the time frame for that is unclear. But history also suggests that the correction will likely be followed by new highs.
The Nasdaq 100 rebounded and opened higher on Wednesday morning, and the index is still up 14 percent year to date. But the Nasdaq 100 is still tracking for its first losing month since October.
Bond investors may soon pay a hefty price for being too pessimistic about the economy, according to portfolio manager Joe Zidle.
Zidle, who is with Richard Bernstein Advisors, believes the vast amount of money flowing into long-duration bonds is signaling a costly mistake.
"Last week alone, there is a 20-year plus treasury bond ETF that in one week got more inflows than all domestic equity mutual funds, and all domestic equity ETFs combined year-to-date," he said recently on "Futures Now."
He added: "I think investors are going to be in a real painful trade."
The yield on the 30-year bond, often referred to as the long bond, sank as low as 2.71 percent on Friday, its lowest level since November 9th.
The action in the bond market comes as the S&P 500 has ripped higher, having hit new records this year along with other stock benchmarks.
"Here we are, midway through 2017, and equity markets are up as much year-to-date as they were in all of 2016. And yet investors are afraid," said Zidle.
He notes that the underlying fundamentals suggest the economy is heating up, and that bodes very well for the stock market's performance.
"The data tells you that earnings all around the world are accelerating while interest rates still remain pretty low. That's actually really good for corporate profits," he said.
Therefore, Zidle is encouraging investors to reach for cyclical stocks—particularly financials which have been market laggards so far this year—instead of putting money into bonds.
"I think financials could be the big surprise for the second half of 2017," Zidle said. "Banks and financials are very cyclical. As the economy does better, they're going to do better."
Crude oil has officially entered a bear market, and Commodities king Dennis Gartman told CNBC the pain is far from over.
In a recent interview, the editor and founder of The Gartman Letter said oil conglomerate OPEC was losing the war on oil, especially in light of the ascension of Saudi Arabia's new crown prince, Mohammed bin Salman. Crude oil is down nearly 20 percent in 2017, and is tracking for its biggest six-month drop since the late 1990s.
"He understands that crude oil, over the course of the next 20 to 40 years, is going to be a worthless commodity," said Gartman. "It will be supplanted by something else."
Crude oil posted its fifth consecutive weeks of losses, its longest weekly losing streak since August 2015. While Gartman expects the crude crush was far from over, he does expect oil to bounce back to $46 in the short-term.
"I bet over the next 2 weeks, you get a bounce," he told CNBC's "Futures Now" this week. "That wouldn't surprise me, since we have been down far more than we probably should have given the fundamentals at this point," Gartman said.
"But I'll tell you one thing: in the long run, crude oil is heading egregiously lower," he added.
In fact, most Wall Street economists see no immediate end to crude's downside. In a research note on Friday, Bank of America-Merrill Lynch stated that global demand was the primary culprit behind crude's woes.
"Oil demand has also failed to improve at the speed required to rebalance the global oil market," the bank wrote. "We doubt that demand growth will accelerate sufficiently to break the current downward price momentum."
However, Gartman has soothing words for investors wondering if crude could be the next 'black swan' anomaly to hit the market's brisk rally. While oil companies may be hit hard by lower crude prices, ultimately Gartman sees the lower prices benefiting the economy as a whole.
"So it may be a black swan for the oil industry itself, but it's a white swan or the economy in general," he concluded.
Investors shouldn't be shaken by all the drama coming out of Washington because ultimately, none of it matters to the market.
That's the argument strategist Bob Doll made Tuesday on CNBC's "Futures Now." According to Doll, strong earnings should be enough to keep stocks moving higher, and the trend isn't about to stop, especially because he thinks earnings growth will remain positive for the rest of the year.
"It's a pattern that's existed for years and years, and I don't know why we would repeal that now unless you have something up your sleeve that says we have an earnings problem," Nuveen Asset Management's chief equity strategist said. "I don't see that coming."
And that, according to the strategist, has been the main reason why the equity rally has continued despite the recent events out of D.C. that were seen as threats to the market.
"The stock market is up [about 9 percent] this year, and Washington has done almost nothing but disappoint," Doll said. "So this shows us that the stock market isn't about Washington D.C. That's noise on the side."
Doll, however, did mention that if President Donald Trump's long-proposed tax cuts do eventually make it through, it would still be "good news" for stocks. But the strategist believes the cuts wouldn't be in place until next year.
Crude officially entered a bear market with Tuesday's drop, and one technical strategist is seeing another 30 percent drop in the commodity.
On CNBC's "Futures Now" Tuesday, Paul Ciana of Bank of America Merrill Lynch said that based on the charts, oil is well on its way to dropping to the $30 range, levels unseen since last April.
"It just keeps going down, breaking supports and failing at lower resistance levels," said Ciana. "It's the absolute definition of a downtrend."
But on the same chart of oil, Ciana also pointed out that the crude crush could actually be signaling a rally in the bond market. A note released by BofAML on Tuesday, titled "Bonds smile as oil cries," remarked on the inverse moves between crude and bonds that has been occurring over the past years. According to Ciana, the inverse relationship is playing out once again "on an even larger scale," meaning that if crude continues to fall, bonds could soar even higher.
"Bond prices have risen to exceed the peak of [that double bottom this year, confirming] that the U.S. 10-year yield will likely fall to 1.97 percent this summer, if not sooner," he explained.
Additionally, stocks could also be in trouble if crude falls. While Ciana doesn't see oil being a direct cause of a downturn in the market, depending on "how much more the decline accelerates" in crude, it could intensify any drop that may happen. And the outlook for crude on a fundamental basis isn't too positive, as Ciana also points out that demand for crude may fall during the summer.
With Tuesday's drop, oil prices have now sunk 19 percent year to date, largely thanks to supply issues related to OPEC and non-OPEC countries. Ciana does see $45.50 being a key level to reach and hold for oil, meaning that the commodity would need to rally 4 percent for some of the concerns to subside.
If it weren't for liquidity right now, the stock market rally could be ripping apart, according to BMO Private Bank's chief investment officer.
"Any sense that this IV drip of liquidity coming into the market is slowing down at all is going to cause some issues," Jack Ablin said on CNBC's "Futures Now."
He emphasized that investors have been encouraged to take on risk due to the trillions of dollars being pumped into the financial system by central banks.
Ablin's comments came a day after the Federal Reserve decided to lift short-term interest rate by a quarter percentage point.
Even though the rate hike was expected, Ablin admits there was some concern tied to the Fed's statement. The Fed put in some new wording, saying that it "expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated."
That part left Ablin "a little bit taken aback with the timing," he said. However, "I think the good news here is, 'Look, this is a potentially contrived crisis.' This could be the taper tantrum all over again where [The Fed says] 'OK, look, we don't want to cause major upset here. We will continue to pump if equity risk taking takes a hit.'"
Ablin said he's "somewhat optimistic" that the rally will continue. He prefers developed and emerging markets over U.S. stocks, arguing that places like Europe could see bigger gains than in the United States because the economy has been surprising experts to the upside.
"I was in the camp that oil prices would stay $45 and above just because I felt like Saudi Arabia would sit at home and eat peanut butter and jelly sandwiches to keep that oil price high in anticipation of the Aramco IPO," Ablin said. "This last little downtrend is somewhat disturbing because we have reached that 45 number."
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