Morning Petrospective – August 19, 2011
il prices were down significantly on Thursday, and the selling started with weakness in the euro in trading overnight. The dollar rallied, as a result, as currency traders bought the dollar and sold the euro based on fears over Europe. So, oil prices, equities and the euro were all lower Thursday morning before anything happened in the United States. Economic data released on Thursday was bearish and it further eroded confidence in assets, starting with equities. By the final bell, the DJIA was down 419.63 to 10,990.58. Oil prices dropped $5.20 a barrel.
The weakness of the euro really got this whole megillah rolling. It was based on expectations of continuing problems with Spanish and Greek debt, it turned into a weaker euro and stronger dollar as investors were putting money into the dollar as a safe haven. Once we get a safe haven day going, people start selling assets, with equities and oil futures prime among these. Once this process got started, negative news from economic data exacerbated it.
Thursday became a full-blooded asset sale day and investors were liquidating equities and commodities through the day. Weaker equities prices helped generate selling in the oil complex on Thursday. As investors dumped equities and commodities, they continued to buy gold, pressing the new uber-commodity to fresh highs.
Traders were trying to understand the latest Consumer Price Index (CPI) figures, which were up enough for many to suggest that the Fed will have a difficult time giving markets another round of quantitative easing or something comparable (the CPI was up 0.5% with the core up 0.2%). QE2, which ended in June, was widely credited with pushing equities and commodities prices higher. With the PPI and CPI numbers looking inflationary, the Fed looks unlikely to give us a QE3 or similar program.
The Federal Reserve Bank of Philadelphia’s general economic index dropped to minus 30.7 in August, its lowest reading since March, 2009. In July, the index had been at 3.2. Estimates had been between minus 10 and 10, so this showed economic activity substantially below expectations.
Existing home sales also fell, dropping 3.5% month-on-month. That puts the rate of sales at 4.67 million in July, down from 4.84 million in June. And the latest unemployment figures showed unemployment applications grew by 9,000 to 408,000 in the week ended August 13.
We seem to have sold off as sharply as we did on Thursday as traders saw a number of negative economic indicators – signals that a year ago could have been used by the Fed as a reason to give us quantitative easing. That option seems more difficult because of this week’s PPI and CPI figures as well as because of comments made by presidential candidates.
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 – MTD Power Burn 2.6 Bcf/d Below Aug 2010.
- Supply Demand Balance Analytic Report – Weekly Storage Injection of 56 Bcf Suggests Continued Supply Strength.
- Texas Observer – HSC Cash Basis May Strengthen with Demand Factors Emerging.
- Gulf Coast Production Analytic Report – Three Tropical Storms in the Atlantic Basin Today.
Platts
- China's independent oil refineries have slashed operations to 25% of capacity in the first half of August on negative topping margins.
- Sanctions on the Syrian energy sector could affect major oil companies based outside the US.
- What have Urals crude oil & Mediterranean light sweet grades hit a 12-month high?
- US Department of Energy has approved Freeport to export LNG to countries with free-trade agreements with the US.
Bloomberg
- Crude Falls to $80 in Fourth Weekly Drop; Brent’s Premium Reaches Record.
- Hedge Funds Led by MHR Bought Ensco and Schlumberger When Prices Slumped.
- Maersk Drilling Puts Rig Expansion on Hold.
- Billionaire Karrer’s MPX May Sell Coal to U.S., Asian, European Companies.
Technical Recap
Crude Options Report / Straddle Runs
NG Options Report
Market Prices
Premium Subscriber (click here to register):
Volumes & Open Interest
End Of Day Straddles
Settlements
To view our energy news and articles on your PDA or mobile device, click here.