Morning Petrospective – August 31, 2011
il prices were higher on Tuesday as traders followed the lead of the New York Stock Exchange again. By the end of the day, the DJIA was up 20.70 to 11,559.95 and prices finished just above the breakout line that would confirm a double bottom in the key index. It is this close to being a confirmed breakout to the upside, and a higher move on Wednesday in equities would highly suggest that they have made an important bottom. Of course, that is what is so critical here; a sudden failure would be that much more bearish.
Investors have a lot to gain – or lose – in a number of asset classes. With equities so near to a critical breakout to the upside, oil futures are at an equally important place. They have been following equities higher and alternated between following equities and the euro for almost four years now. When oil prices react positively to economic news, it is an extension of their reaction to equities (moving higher).
The biggest or most important factor in yesterday’s trading came from the latest Federal Reserve policy-making board’s minutes – which showed a number of voting members had voted in favor of taking more substantial and more accommodative steps. In plain English, there are a number of Fed governors who are ready to vote for QE3 or its equivalent. Markets still think it could come, especially if we get more weak reports.
We know that three Fed governors dissented from the latest agreement and it seems that these three are against the Fed doing much of anything. They believe that the ball is in the government’s court and that Congress and the White House need to get together and find a fiscal solution for the nation’s woes. And Chairman Bernanke is not keen to be lined up in anyone’s crosshairs, especially after being blamed by a number of people for higher oil prices and for “printing money,” which Governor Parry looks at quite negatively. Mr Bernanke is not keen to be become a focal point in the coming election, and he knows he runs the risk of doing exactly that.
The “activists” on the Fed, using our own terminology, regard the mandate for the fullest employment possible as a compelling objective that commits them to testing the limits of policy in regard to inflation. They feel they need to let the reins go right up until inflation hits 3% - in the attempt to reduce unemployment to 6% or less. The “strict constructionists,” again using our own terminology, do not believe the Fed should be doing more than protecting the currency against inflation or devaluation. Mr Bernanke is an activist who is scared to death of being seen as being too active by those opposed to the measures he might use.
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.
Platts
- Iran has always wanted the stability, peace and progress of Saudi Arabia," an Iranian foreign ministry official said, Fars reports.
- Scaroni says Eni has a target - "maybe a bit ambitious" - to restart the Libya-Italy Green stream gas pipeline by Oct 15.
- Japan's JX to cut Sep crude oil throughput 9% on year to 5.11 million kiloliters: company official.
- Crude oil stocks build as imports surge and inputs drop: Analysis of oil data released by API.
Bentek Energy
- Power Burn Analytic Report – August Power Burn Down 1.3 Bcf/d Versus 2010.
- Industrial End Users Analytic Report – Texas Manufacturing Survey Shows Large Drop as Growth Slows.
- Supply/Demand Balance Analytic Report – Injections Creep Higher as Power Demand Wanes in the US.
- Texas Observer – South Texas Outflows Collapse as Spread Shrinks.
Bloomberg
- Lukoil Quarterly Net Rises 67% on Oil Price, Beats Estimates.
- Crude Heads for Monthly Decline in New York as Slower Growth Curbs Demand.
- Repsol Oil Hunt Risked as Sacyr Demands Cash.
- Cambodia Calls for Talks With Thailand on Disputed Offshore Gas, Oil Area.
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