Daily Agenda: Oil Prices Fall on Robust Supply

Crude markets surprised by supply data; Glencore announces smaller losses; Apollo settles with SEC over fees.


American Petroleum Institute data released yesterday surprised oil markets with a significant increase in crude inventories and a sharp decline in distillate stocks. In response, futures contracts for front-month delivery of West Texas Intermediate grade crude declined by more than 1 percent, despite news that Iran may support a production cap by the Organization of Petroleum Exporting Countries. Brent grade futures also declined, contributing to a mild selloff for emerging market assets. The Energy Information Administration’s data on U.S. inventories will be released later today. After energy markets were buoyed by a 2.5-million-barrel contraction in last week’s report, any confirmation of the API estimates by the Department of Energy analysis would revive concerns over a supply glut. For investors, the question is whether a concerted effort by OPEC could achieve the desired effect, or if rising supply levels are signaling that oil prices will remain range-bound until global demand increases.

Apollo settles with SEC over fee disclosures. The Securities and Exchange Commission announced a settlement yesterday with New York-based alternative-asset investment firm Apollo Global Management that includes a $52.8 million fine over fee disclosures to investors. According to the SEC, Apollo failed to properly disclose fees that the management firm charged to companies in its portfolio prior to selling them. Known as monitoring termination fees, the charges have been controversial with buyout fund investors, many of whom claim that they are created without any additional work performed by the manager. The SEC did not address the nature of the fees but rather the disclosure in its complaint.

Glencore reports smaller loss for first half. Mining company Glencore Financial released first-half 2016 results today, with the mining giant reporting a net loss of $369 million for the period despite improving commodity prices during the early portion of the year. The loss represents an improvement over the same period last year despite declining revenues, as the company continues to sell assets and cut costs. On Tuesday, Glencore announced a deal to sell a portion of an Australian gold field to Evolution Mining. Year-to date Glencore has shed more than $3.5 billion in assets with a target to sell up to $5 billion before 2016 ends.

Pfizer acquires drug rights from AstraZeneca. New York drug company Pfizer yesterday announced an agreement to acquire a suite of antibiotics from AstraZeneca’s portfolio, in a deal potentially valued at more than $1.5 billion. The rights to produce and distribute the five drugs in the transaction will not extend to non-U.S. and Canadian markets, since other firms hold those concessions. The transaction is the latest in which AstraZeneca spun off distribution rights to products outside its core focus areas while retaining the underlying intellectual property. On Monday it was announced that Pfizer had agreed to acquire cancer drug developer Medivation for $14 billion. Pfizer made an offer to buy AstraZeneca in May 2014 but was rebuffed.

German GDP confirms a slowdown. The Statistisches Bundesamt Deutschland today released gross-domestic-product data that confirmed that the pace of growth slowed slightly in the second quarter. The headline GDP index slowed to an expansion of 0.4 percent on a quarterly basis versus a prior 0.7. Critically, investment levels dropped during the period as corporate leaders braced for the fallout from the United Kingdom’s vote to leave the European Union.

Earthquake devastates remote region of Italy. A 6.2 Richter scale earthquake in a mountainous region of central Italy has left an estimated 40 people dead and destroyed several historic rural villages. The remoteness of the area has made emergency response difficult. Italian Prime Minister Matteo Renzi will visit the region today as rescuers continue to search for survivors.