Morning Petrospective – August 2, 2011
he House and Senate came together with the president at the last minute on Sunday to hammer out a compromise measure that would save the US economy from the tragedy of a default. Oil prices and equities jumped higher on the news, but they could not hold onto their gains for very long. Two weeks ago, prices were rallying fairly forcefully on every sign that a compromise would be reached. But, then last week changed that, and there was no sign of the two sides meeting in any middle at all. The market got used to falling. This final compromise came too late.
As of this writing, the House of Representatives will vote on the new compromise bill this evening and the Senate just announced that it will vote on Tuesday. Everyone in power tells us that these bills will be passed and that there will be little or reconciliation needed. At least, that is the story on Monday night. Prices for everything were volatile on Monday, with oil trading both higher and lower and prices rallied late in the session to finish closer to unchanged, although still in negative territory.
The US dollar jumped higher last night on the news, and then it sold off through the morning. A little after 6 AM, the dollar started to rally and they kept moving higher through noon. At that stage they eased slightly. Oil prices followed the euro to an extent through Monday’s trading. They jumped higher after the news that an agreement had been reached, sold off, rallied and then worked lower. They rallied late in the session, but finished in negative territory.
The DJIA dropped 10.75 to 12,132.49 on Monday, making it the sixth session lower (we believe). Equities were also higher and lower in volatile trading on Monday, and traders seem to have been pleased that the debt crisis seems over, but the market’s upward momentum has been sapped. As we noted earlier in this report, two weeks ago, prices jumped every time it looked like the debt crisis would be solved. All last week, markets reacted negatively, but they did start with a certain reluctance. No one wanted to believe that the debt ceiling would not be raised. By Monday this week, that reluctance had been replaced with a much more cynical feeling about our government and debts. And a resolution to the crisis was not met with the euphoria that it would have been met with two weeks ago.
Traders also were wiser by way of Friday’s GDP figure and then by Monday’s ISM manufacturing index. It dropped to 50.9 in July, which was its lowest level since the recession ended. Capital Economics said that it “is pointing to annualized GDP growth of no more than 2% in the third quarter, potentially dashing hopes of an immediate bounce-back” from the weak growth in the second quarter.
Traders will try to find solace in this week’s DOE statistics, but they might not find any. The picture is starting to become more bearish, with the economy looking quite weak.
FMX Newswire
FMX Newswire is an overnight news summary designed to meet the needs of professional energy traders. The content is to-the point, professional grade and not widely reported in the mainstream media. All sources are professional respected firms and newspapers.
Bentek Energy
- Power Burn Analytic Report – Power Burn to Reach 34.8 Bcf/d Tomorrow.
- Supply Demand Balance Analytic Report – US Dry Production Hits new Peak of 61.8 Bcf/d.
- Industrial End Users Analytic Report – ISM Report; Manufacturing Activity Expands, but Pace of Manufacturing Slows.
- Texas Observer – Texas Electricity Demand Sets New Record.
Platts
- West Virginia tries to get out in front of the shale gas boom.
- Total finalizes sale of refiner Cepsa interest to Abu Dhabi's IPIC.
- New frontiers: The growing role of US states in governing oil and other pipelines.
- Indonesia Corridor block gas output restored; supply to Singapore normal.
Bloomberg
- Crude Drops for Third Day on U.S. Economic Outlook; Stockpiles May Climb.
- Li Ka-shing’s CKI to Buy Northumbrian Water in $3.9 Billion Deal.
- China’s Natural Gas Demand May Rise 16% This Year, Industry Ministry Says.
- View: Debt-Ceiling Deal is an Alarming Bipartisan Mess.
Technical Recap
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