Morning Petrospective – October 7, 2011

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hursday’s session was complicated. Prices were under selling pressure early in the day, as investors had been hoping that the European Central Bank (ECB) would cut interest rates. In the event, the ECB left them unchanged. That should have been bullish for the euro – and ultimately it turned out that way, but the initial reaction was not immediately that way. It was only one factor in a number of them. The biggest factor seems to have been follow-through buying. After Tuesday’s “bear traps” in oil and in equities, those markets rallied steeply on Wednesday. And that strength was back on Thursday.

Investors were trying to build a new paradigm, but not all the pieces fit. The lack of an interest rate cut in Europe should have buoyed the euro, and it ultimately did, just not at first. Instead, investors decided to ignore the negative economic repercussions of higher-than-expected interest rates. They focused on recent ISM and PMI indices showing stronger economic growth in the US and Europe. They were able to combine an emerging outlook for economic recovery with rebounding chart signals and with renewed hopes for an end to the euro-zone sovereign debt crisis.

Investors bought assets and the DJIA finished up 183.38.38 to 11,123.33. Oil prices advanced as well. Precious metals and copper prices were higher, along with grains prices – at least on Thursday morning into early afternoon. They sold off in afterhours trading, though.

The ECB refused to lower interest rates, but it did offer its own limited form of quantitative easing. It will buy €40 billion in bank bonds. That’s not exactly $600 billion (it is about $54 billion), but it was still considered a step forward in addressing sovereign debt issues in Europe.

Part of Thursday’s asset buying came from short-covering going into Friday’s monthly jobs report by the Labor Department. Thursday morning’s weekly figures showed an increase in jobless claims of 6,000 to 401,000. Estimates had been for 410,000, on average (Bloomberg’s survey). After ADP’s Wednesday ‘preview,’ there was optimism that Friday’s numbers could potentially turn the tide.

Of course, they will need to be very good to change perceptions among those who really matter in government, business and among workers. A “really good” number on Friday is still going to show way more people out of work than anyone wants to see. At the same time, though, even if we see the worst number anyone could expect, there will be a faction among observers who will feel that the picture is improving. The median expectation is for an increase of 59,000 in Friday’s report.

Investors were cheered by figures in the weekly report that showed a drop of 52,000 in the number of people continuing to collect benefits, taking it to its lowest level since July 30th. That number did not include those receiving extended or emergency benefits; that figure fell by 28,370 to 3.55 million. The key measures improved slightly in the latest weekly numbers.

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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 – EPA Releases Proposed Changes to CSAPR.
  • Nuclear Plant Status Analytic Report – Outages Expected to Rise 3 GW Next Week.
  • Texas Observer – HSC Basis Stays to HH; NGPL Restricts Flows in East Texas.

Platts

  • Indonesia's upstream regulator BPMigas may change gas supply source for Singapore GSPL contract.
  • Pakistan refiners eye $1 bil spend in next 3 years on upgrades and diesel expansion.
  • UK's Gulfsands sees Syrian production slip further on sanctions.
  • Gazprom and RWE extend exclusive talks on possible power partnership in Europe.

Bloomberg

  • Crude Oil Trims First Weekly Gain in Three Weeks Before U.S. Jobs Report.
  • Libyan Council Forces From Misrata Battle Qaddafi Loyalists Inside Sirte.
  • Power Companies Borrow Record in Loans as Cost of Fuel Jumps: Japan Credit.
  • Why Occupy Wall Street Should Scare Republicans: Jonathan Alter.

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