America may become a Crude Oil Exporter…..Really?

Two days after Senator Lisa Murkowski said she would introduce legislation this year to allow U.S. crude exports, Pioneer Natural Resources (NYSE:PXD) CEO Scott Sheffield has put the chances of lifting the ban in 2015 at 40% to 50%. The chief executive, who has recently held talks with members of Congress and the Obama administration about removing the restriction, also sees an 80% to 90% chance that American E&P companies will be allowed to export crude by early 2017. The Commerce Department gave Pioneer and Enterprise Products Partners (NYSE:EPD) permission last year to begin selling an ultralight oil product called condensate.1 Although it may take several years for this once unheard of proposal becoming a reality, keep a close eye on Washington to see if this begins to gain bipartisan support from Congress.

If Some Is Good, Is More Better?

On Wednesday April 15, 2015, European Central Bank (ECB) President Mario Draghi reiterated that the ECB intends to continue its €60 billion per month bond-purchasing program until September 2016 as well as keep its key interest rates steady for the foreseeable future. This news pushed the 10-year German Bund to a new record low of 0.107%, the 30-year Bund to a new low of 0.52%, and buoyed the European equity markets throughout the final few hours of trading. While this was largely taken as a positive sign, some investors are worried that the ECB will eventually have to broaden its scope of asset purchases to offset the increasingly likely decline in bond yields. At what point will the ECB have to ask itself if too much of a good thing might end up hurting Europe further down the road?

The Growth of Shadow-Banking Risk

The International Monetary Fund (IMF) is renewing its call for greater oversight of the aptly named shadow-banking industry. As a result of the financial crisis, regulators around the world tightened oversight of the traditional banking sector which resulted in the migration of lending and risks to the shadow-banking industry. The sector which includes mutual funds, ETFs, hedge funds and other institutional investors has skyrocketed to now over $75 trillion in assets. The IMF has identified several key risks including the concern that a large number of assets are being managed by a small number of institutional investors which could send shock waves throughout the financial markets if there is any change in the consensus on any number of market-moving events.1 Keep an eye out to see if regulators heed the IMF’s warning and start to take measures to reduce the risks inherent in the shadow-banking industry.


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