Morning Petrospective – June 1, 2011
n Tuesday, with traders returned from the Memorial Day Weekend, oil prices were bid higher to a new three-week high. A much-stronger stock market helped pull oil prices higher, to their highest levels since May 10th. And the euro was much stronger, advancing to a new three-week high against the dollar, on news that Germany may be less aggressive in pushing for an early rescheduling of Greek bonds. These factors were enough to overwhelm bearish economic data and continuing weak demand for refined products.
The US dollar dropped below 70 euro cents in overnight trading Monday into Tuesday. Most of the damage was done Monday night, but the dollar was never able to recover against the euro during trading during Tuesday’s normal session. The dollar weakness helped push oil prices higher.
The fact that the dollar held on through the regular session and did not sell off more strikes us as being notable, but it did end the day below 70 euro cents. And it now seems to be on course to test the lows seen at the end of April. If that is the case, we could see the DJIA and oil prices also advance to test their late April highs.
Economic data was disappointing all day long. Consumer Confidence fell to a six-month low of 60.8 in May, down from 66.0 in April. Capital Economics noted that consumers certainly had a number of negatives to change their thinking. Housing prices have been weaker lately, gasoline prices remain stubbornly high, the stock market has been in a holding pattern for a month and unemployment has ticked higher, rather than lower, in the most recent weekly figures. The S&P/Case-Shiller 20-city index dropped to its lowest level since 2003 in March. It was down 3.6% from March, 2010, which was the largest year-on-year decline since November, 2009, Bloomberg noted on Tuesday.
The Institute for Supply Management (ISM) in Chicago reported on Tuesday that its business barometer had fallen to 56.6 in May from 67.6 in April. A Bloomberg survey had expected a decline to 62.0, so this was another weaker-than-expected data-point.
On Wednesday, we will get a look at ADP’s unemployment figure for May. ADP is expected to project gains of 175,000 jobs in May. The Labor Department will release weekly figures on Thursday and the full monthly figures for May on Friday.
And we will get another look at the Department of Energy (DOE) statistics this week before those figures are released. The DOE figures will be released a day late, on Thursday, this week. While everyone will be looking at the headline inventory numbers, we believe that the much more important numbers are to be seen in the four-week average demand section.
In other news, TransCanada shut down the Keystone Pipeline because of a 10-barrel leak in Kansas.
FMX Newswire
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Bentek Energy
- Texas Observer – Prices Rebound from Pre-holiday Levels.
- Industrial End Users Analytic Report – May Industrial Demand Finishes Strong.
- Supply/Demand Balance Analytic Report – US Supply and Demand Fall led by Reduced Production and Easing Weather.
- Power Burn Analytic Report – Power Burn Down 0.6 Bcf/d on Cooler Weather.
Platts
- Greece-based Aegean Marine Petroleum Network starts bunkering operations in Canary Islands.
- Japan refiners June bonded bunker supply stable from May at 340,000 mt.
- Russia to tax natgas industry $18 billion more through 2012-14.
- Australian Santos' sale of Evans Shoal natgas to US-based Magellan Petroleum collapses. .
Bloomberg
- Oil Trades Near 3-Week High on U.S. Supply; MF Global Says $105 Possible.
- Russia, Qatar Face Pressure to Scrap Gas Link to Oil Prices as Crude Jumps.
- Merkel Faces Achilles Heel in Upgrading Grids to Exit German Nuclear Power.
- IAEA Says Japan's Nuclear Regulators Need More Oversight After Fukushima.
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