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The Hottest Oil Trade Is No Longer in Texas: Markets I The Wall Street Journal (WSJ)
Welcome to your daily dose of markets from The Wall Street Journal. I'm Jessica Menton, here with your morning update.
We're keeping our eyes on technology stocks amid a recent slump that has pressured major U.S. indexes.
Also in focus: rising bond yields. The U.S. bond market will reopen
after being closed Monday for Columbus Day. Wall Street is also
monitoring speeches from a batch of Fed officials throughout the day.
Investors are looking for any adjustments in central bankers' views on
inflation and the Fed's interest-rate path after a bond selloff sent
Treasury yields to multiyear highs last week.
Meanwhile, our Stephanie Yang takes a look at how a shale play is quietly staging a comeback this year.
Markets in a Minute
Global stock moves were muted, as investors continued to weigh the impact of rising bond yields on market sentiment.
A shale play that was left for dead has come roaring back in 2018.
The Bakken, which stretches from Montana to
North Dakota, had long been considered by some in the energy industry
to be played out.
Now the region is experiencing a comeback,
luring investors as crude prices have surged. Oil production in North
Dakota has climbed to all-time highs this year, hitting 1.27 million
barrels per day in July.
That’s leading to outsized gains for
producers concentrated on the Bakken. Whiting Petroleum, which has
operations in North Dakota, Colorado and Texas, is up 82% year to date.
Continental Resources and Oasis Petroleum are up 28% and 58%,
“It's interesting times in North Dakota,”
said Pablo Prudencio, an analyst at energy consultancy Wood Mackenzie.
“The Bakken has a story of its own right now.”
Mr. Prudencio pointed to several factors
that have contributed to the Bakken’s recent rise. U.S. oil futures
surpassing $70 a barrel have spurred more drilling across the country.
But cheaper acreage and improved crude transportation have made the area
more attractive than some other major shale fields.
While the Permian basin in Texas has
attracted attention as the nation’s most prolific oil basin, constraints
to getting crude out of the region have dampened enthusiasm for those
Permian producers Diamondback Energy and
Concho Resources have risen 7% and 5%, respectively, while the SPDR
S&P Oil and Gas Exploration and Production ETF, or XOP, is up 17%
year to date.
“As folks were getting more concerned about
pipeline capacity [in the Permian], the capital started to move away,”
said Dane Gregoris, senior vice president at RS Energy Group.
Regional oil prices in North Dakota
have stayed stronger than in Midland, Texas through much of the year,
where transportation bottlenecks pushed prices as much as $15 below the
U.S. benchmark. But recently that divergence has started to disappear.
And Bakken production is a far ways from
overtaking that of the Permian. According to the U.S. Energy Information
Administration, Bakken oil production came to 1.3 million barrels per
day in September 2018, compared to 3.4 million barrels per day in the
Mr. Gregoris said some investors started to
turn their attention to other shale plays about a year ago, when
constraints in Texas began to emerge.
“You can see how that's played out with all these Bakken names,” Mr. Gregoris said. “It's a totally different ballgame.”
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The Cboe Volatility Index, or VIX, settled at 15.69 Monday, the highest close since July 3.
Natural-gas prices rose to an eight-month high as
traders anticipated colder-than-average weather spreading across the
Midwest in the next few weeks. Futures for November delivery gained 3.9%
to $3.267 a million British thermal units, their highest close since
Private-equity firms collectively raised $68.2 billion
in the first three quarters of the year, up 18% over the same period in
2017 and already surpassing the $66.2 billion they amassed in all of
2016, according to data from Preqin.
The Chicago Fed's Charles Evans speaks at 10 a.m. ET, the Dallas Fed's Robert Kaplan speaks to the Economic Club of New York at 7:30 a.m., the Philadelphia Fed's Patrick Harker speaks on higher education at 1 p.m., and the New York Fed's John Williams speaks on monetary policy at 9:15 p.m. and joins a press conference with Bank of Indonesia Governor Perry Warjiyo in Bali at 10:35 p.m.
Twitter, Facebook and Alphabet are no longer in the S&P 500’s tech sector. PHOTO: LUCAS JACKSON/REUTERS
Tech ETFs are carrying on without some big names. Facebook, Twitter and Alphabet officially left the S&P 500’s technology sector last month, but investors appear to be in no hurry to follow their lead.
Is the bond market freaking you out? It may spark a healthy rotation. The
good news for shareholders is that the market overall might be fine.
The trouble lies with the FANGs and other acronym stocks that have been
leading indexes higher, James Mackintosh writes.
Emerging markets are scrambling to contain the pain. As Pakistan starts bailout talks with the IMF, many developing nations have taken steps to limit fallout from weakening currencies and rising interest rates in the U.S.
The IMF lowered its global growth outlook. The International Monetary Fund cited rising trade protectionism and instability in emerging markets as it dropped its predictions for 2018 and 2019.
Three hedge funds have closed in less than a week. Some funds have closed as skepticism has increased about the value of paying hedge fund’s famously high fees. Hedge funds often charge a 2% management fee and a 20% cut of performance gains.
Yields on Italian bonds hit a four-and-a-half-year high over budget concerns. Investors continued to sell off Italian government bonds as the country’s populist government clashed with the European Union over budget targets.
At Justice Kavanaugh’s swearing in, President Trump apologized for his “pain.” Mr. Trump held a ceremonial swearing-in for the new Supreme Court justice, where the president apologized to him for a fraught confirmation process. In attendance were a handful of Republican senators and the other eight Supreme Court justices.
What We've Heard on the Street
“Rising interest rates mean credit-card companies will instantly earn
more on their floating-rate loans. At the same time, the booming economy
and tight labor market are keeping defaults low...Yet shares of these
companies are performing poorly.”