Morning Petrospective – June 2, 2011
ow that we get a look at it, it might have been prettier when it made less sense. And, that has been the biggest problem for a full year now: Higher equities have been accompanied by higher oil prices. Over the last two or three years, markets have had a very hard time getting oil prices down without pulling the stock market down with them. We saw both move dramatically lower on Wednesday, with the DJIA posting its largest decline since last August. Disappointing numbers on employment were what triggered selling.
For a number of sessions, weak economic data have either been obscured by a weak dollar or by other salient features that have prevented the economic weakness from being reflected in lower equities or commodities prices. On Wednesday, that changed. Markets seem to have suddenly come to their senses, but we were reminded how it is sometimes better to be kind than right.
This month’s ADP employment report, often seen as a precursor of the Labor Department monthly report that comes out on the first Friday of each new month (for the previous month) was surprisingly weak. Instead of showing an increase in non-farms, private payrolls of 175,000 to 180,000, as had been predicted and expected, ADP reported a gain of just 38,000 new jobs in May.
A weaker US dollar had papered over weak economic data earlier in the week and the week before. But, on Wednesday, it was not weak enough to hide the bearish implications of the ADP employment figures. Equities dropped 279.65 to 12,290.14 and crude oil prices dropped $2.41 to just above $100.00.
As it turned out, the US dollar had a steep rebound later in the day, starting just before noon, and that added pressure to the selling in oil markets. The dollar did not break back above 70- euro cents, but it rallied sharply enough to add insult to the injury of Wednesday’s bearish economic statistics.
Friday’s Labor Department monthly report on jobs still tops this week’s list of economic data. Analysts scrambled on Wednesday to revise estimates lower from the initial consensus of 175,000, and estimates are all over the lot now. On top of the ADP figures, the ISM manufacturing index fell to a 19-month low in May, touching 53.5, down from 60.4 in April.
Traders were also trying to grapple with an increase of 165,000 bpd in Opec output in May, with increased output from Saudi Arabia and Nigeria making up for production lost by Libya. Iraqi output also increased, by 65,000 bpd, according to a Bloomberg survey.
FMX Newswire
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Bentek Energy
- Storage Analytic Report – Record Heat Pushes Injections Lower.
- Industrial End Users Analytic Report – Ethanol Production and Natural Gas Demand Soar Over 2010.
- Supply/Demand Balance Analytic Report – US Production Slips Slightly After Setting New Record High.
- Power Burn Analytic Report – Power Burn Down 3.0 Bcf/d on Cooler Temperature.
Platts
- PSEG Power has terminated the proposed $335 mil sale of its 1,000-MW Odessa, Texas, power plant to a municipal utility group.
- The US Federal Energy Regulatory Commission's Washington HQ will be closed for a second straight day Thursday because of a power outage.
- S Korea's Hyundai Oilbank buys 30,000 mt bunker-grade high sulfur fuel oil for June.
- Natgas demand for #power could reach 30 Bcf/d by 2020, according to Tudor, Pickering, Holt report.
Bloomberg
- Oil Climbs From Lowest in a Week as Falling Dollar Counters Supply Growth.
- Oil Market Needs 500,000 to 1 Million Barrels More, OPEC Delegate Says.
- Gas Exporters’ Forum in Cairo Marked by Qatari Absence, Libyan Arrival.
- Fukushima Radiated Water May Overflow.
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