At this point, it looks as if the 1.25 level is massive resistance, and of course the 61.8% Fibonacci retracement level sits right there as well.

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(Bloomberg Opinion) — American oil producers have cut much more output than you think. Their reaction to market forces has been bigger than official data suggest, and that means the U.S. is actually working alongside Saudi Arabia, Russia and other big oil producers, to help balance oil supply and demand — even if that wasn’t quite what President Donald Trump intended.Two sets of data from the U.S. Energy Information Administration show that crude production is now about 11.6 million barrels a day, down by between 1.2 million and 1.4 million barrels a day, or roughly 10%, from plateau levels reached over the just-ended winter, depending on whether you use the weekly or the monthly numbers.To put those U.S. figures into perspective, the members of the Organization of Petroleum Exporting Countries and their allies agreed last month that they would each cut their production by 22% from baselines that, for the most part, reflected October 2018 levels. Early evidence from tanker tracking data monitored by Bloomberg shows that some, like Saudi Arabia, have made very quick, big steps toward that target; others, like Iraq, are lagging behind. But all the big OPEC producers — including Iraq — have increased their prices and cut allocations of crude to key customers for June, suggesting that compliance levels will improve. By comparison, the official figures suggest the U.S. has made much smaller production cuts. But those U.S. figures are probably underestimating the size of the reduction forced on American oil companies — and underestimating it by a huge amount.The flow of oil going into the supply chain must balance the volume coming out. That’s just basic math.But if you add production, imports and crude taken out of storage tanks (the supply side of the equation) in the weekly EIA data, this doesn’t equal the amount processed by refiners, used, exported or put into storage tanks (the demand side). The EIA acknowledges this difference by publishing a crude adjustment factor and, in absolute terms, that number is getting very big indeed.In the data for the week to May 8, the adjustment factor was reported as -914,000 barrels a day. That’s the most negative it’s ever been. Put simply, the EIA’s numbers for last week were either over-estimating crude supply by 914,000 barrels a day, under-estimating demand by a similar amount, or some combination of the two.The amount of crude coming into, or being sent out of, the country is pretty well documented. So too is the amount going into and out of storage tanks and into refineries. So the most likely source of the discrepancy is the production numbers.If the adjustment factor does reflect an over-estimation of crude production, American oil companies could be pumping as little as 10.6 million barrels a day. That would be an output cut of almost 2.4 million barrels a day, or 18%, bringing them much closer to the reductions agreed to by OPEC and its allies.There is plenty more circumstantial evidence that the U.S. is producing less. There are now fewer rigs drilling for oil in the U.S. than there were even during the slump of 2016, when a collapse in oil prices brought about the end of the first shale boom. Consultancy Facts Global Energy published a note on May 1 arguing that company earnings reports signaled a potential 3 million barrel a day drop in U.S. production by the end of June. We would seem to be well on the way to that figure.Even though President Trump has sought to protect America’s oil industry and cajole others into cutting output to buoy up prices, the market seems to be making sure that the pain is being shared. But those deeper cuts, though involuntary, are helping to bring global supply and demand back into balance more quickly, and setting a firmer stage for the start of oil’s recovery.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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On April 29, Nio (NYSE:NIO) announced that it had secured $1 billion in funding to carry on building electric vehicles. Nio stock jumped 8% on the news. However, shares have been sideways ever since.Source: Sundry Photography / Shutterstock.com Is there something holding back investor enthusiasm for the funding arrangement? You better believe it. Here's the breakdown. 75% of What?Three companies are investing in Nio: Hefei City Construction and Investment Holding, CMG-SDIC Capital, and Anhui Provincial Emerging Industry Investment. They are collectively investing 7 billion yuan, or approximately $1 billion, into the company.InvestorPlace – Stock Market News, Stock Advice & Trading TipsThe trickier part of the arrangement is that the investment is going into a newly established company, Nio China.As part of the investment, Nio will transfer its Chinese assets (valued at approximately 17.77 billion yuan or $2.5 billion) into the new company as well as 4.26 billion yuan ($600 million) cash in exchange for 75.9% of the business. The three investors will hold the remaining 24.1% of Nio China. The deal is expected to close by the end of June.The $2.5 billion asset contribution is valued at 85% of Nio's average market value of the 30 trading days preceding April 21. What About Debt?Simple enough. But those numbers don't include debt.Nio had $1.16 billion in short- and long-term debt at the end of December. It also had current and long-term operating lease liabilities of $317 million, bringing total debt to $1.48 billion. Add in the $200 million in short-term convertible notes it raised in February and another $235 million in April and you get to a total debt of $1.92 billion.Based on a market capitalization of $3.62 billion and $574.8 million ($139.8 million on the balance sheet plus $435 million in cash for new debt), Nio has an enterprise value of approximately $5 billion.Nowhere in the company's press release about the $1 billion investment in Nio China does it say anything about the debt.Kudos to The Motley Fool's John Rosevear for pointing this out recently:"That all seems well and good, but NIO has yet to clarify why it's using this structure for the deal, what will happen to its assets outside of China, and what will happen to the roughly $1 billion in debt that it had as of the end of 2019 — all very important questions from an American investor's perspective."Are we to assume that Nio's non-Chinese assets are worth approximately $543 million ($3.62 billion market cap times 15%) because the investment agreement valued Nio's asset transferred to Nio China at 85% of market value? What Does This Mean for NIO Stock?What are Nio shareholders getting for their 75.9% stake in Nio China? That's a good question.Based on 85% of the assets being transferred to Nio China and an enterprise value for the entire company of $5 billion, my back-of-the-napkin calculation would be $3.23 billion for its stake in Nio China (75.9% of $4.25 billion, which is 85% of $5 billion). Add in the estimated enterprise value of $750 million for 100% of the non-Chinese part of its business, and you get $4 billion.Add in the $1 billion investment and you're back to a $5 billion enterprise value.As far as I can tell, the deal was structured this way so that if Nio can make a go of it outside China, its existing investors will benefit from that success, while the new investors are merely hoping to make its business in China a success.Did the company pay too high a price for that billion dollars in funding?On April 29, in addition to announcing its $1 billion investment, it also notified investors that it would have to delay filing its 20-F to incorporate the details from this investment. Nio is expected to file its 20-F soon. We'll know more then.Nio needed the money. Both parties gave up something to get something. Often, those are the best kind of transactions.Will Ashworth has written about investments full-time since 2008. Publications where he's appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * Top Stock Picker Reveals His Next 1,000% Winner * America's Richest ZIP Code Holds Shocking Secret * 1 Under-the-Radar 5G Stock to Buy Now * The 1 Stock All Retirees Must Own The post Nio Stock's Newest Backers Are Betting On Chinese Success appeared first on InvestorPlace.

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