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Morning Petrospective – July 6, 2010

July 6 2010, 08:18

Morning Petrospective – July 6, 2010

he oil complex was lower again on Friday, which surprised a number of observers, who felt that we should have seen some short-covering before the long holiday weekend, after a very weak five-day period. August crude oil prices lost $6.72 a barrel, down 8.5%. Heating oil lost 21.79 cents a gallon, down 10.2%. Gasoline lost 18.11 cents, or 8.4%. Natural gas prices lost 22.1 cents, or 4.5%. More than anything, this last week was a story of lost asset value.

It was the steepest and most sustained set of losses in the oil market since the “Flash Crash” of early May, and it was accompanied by losses in equities. The DJIA lost 457.33 points over the week.

One major difference was the euro. In early May, it had been the flashpoint around which the huge collapse in assets had coalesced. Early in the week, the euro had fallen, and that put pressure on assets and equities. But, by the end of the week, all eyes were focused on the disappointing economic statistics that had been released for the United States, and it was the dollar that dropped along with a number of assets.

That was not the only unusual change, but it was certainly the most notable. For more than a year, and for parts of the last three years, a strong euro had meant stronger oil prices. As we ended this decisively weak five-day period, traders and investors had seemingly lost interest completely in the US dollar, and they were selling it, equities and commodities as if that’s the way it had always been.

Clearly, something major had to stir this. On Friday, the Labor Department reported the loss of 120,000 jobs in June. Many of the lost jobs had been temporary workers for the US Census Bureau, but private sector gains were also smaller than had been expected. Factory employment increased by just 9,000 in June, its smallest gain in 2010.

Factory orders placed in May also fell by more than expected, dropping by 1.4%, the biggest decline since March, 2009, and more than the half a percentage decline predicted in what has been a consistently a bright spot in the data. This statistic capped a week that saw a nearly 10% decline in consumer confidence along with a 30% decline in pending home sales. By the time investors went home for the Independence Day Weekend, they were thinking more about a double dip recession than about the possibilities for an unexpected advance over the long weekend.

That is also odd, especially in tropical storm season, on the first weekend after the earliest Atlantic hurricane in 15 years. After watching prices get chewed up by selling all week long, one could have been forgiven for taking profits on the short side or even getting lightly long on the off-chance that we would return to a tropical depression off the West African coast.

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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 oil

The extraction of natural gas by companies operating in Peru reached 686,000 Mcf/d in June, up 60% from May.
Australia's Beach Energy signed a non-binding MOU with Itochu Corp to exploref supplying shale gas from Cooper Basin to an LNG project.
UAE's Abu Dhabi airport is still supplying jet fuel to Iranian civilian aircraft, said a Middle East jet fuel trader Tuesday.
OPEC says its member states saw their oil earnings fall 43% last year, but their oil reserves rose by 4%.

Bentek Energy

Power Burn Report - U.S. Power Burn Increases 4.4 Bcf/d Over Weekend
Gulf Coast Production Report - Gulf Production Bounces Back
Industrial End Users Report - U.S. Industrial Demand Weakens Through Holiday Weekend
Daily Supply/Demand Balance - Some Production Returns to the Gulf After Hurricane Alex Passes

Bloomberg