Morning Petrospective – August 27, 2010
he oil complex was higher on Thursday as traders reacted to a surprisingly large decline in initial jobless claims. After a steady diet of bearish economic news, this week’s unemployment figure was a surprising breath of fresh air. Initial jobless claims dropped by 31,000, which was the first decline seen in a month. It was also by a decent amount. This news could not prevent the DJIA from selling off below 10,000, dropping 74.25 to 9,985.81, so it was not the stock market that helped oil prices. The dollar was slightly lower yesterday, but it was hardly a major move. Nonetheless, the slightly better employment figure seems to have brought investors back into oil.
The weekly unemployment figure declined to 473,000, and surveys conducted by wire services had predicted a decline of just 10,000. As a result, the 31,000 decline was more supportive than most had been expecting. And that immediately brought in short-covering by commission houses and fresh buying by index funds, which had the added advantage of knowing that prices were oversold and near major support levels in crude oil and in heating oil. Traders and investors see the $70.00 level as the psychological support above the real support figures at $69.60 and below that at $64.24. The fact that crude oil hit $70.76 on Wednesday had alerted the shorts to the danger and the prospective buyers to the possibilities of buying near the lower end of a range that has long been discussed in terms of being between $70 and $80 but which, in reality, is now between $69.50 and $82.97. At the same time, though, the four-week unemployment average was up by 3,250 to 486,750, which is still a fairly bearish figure. We are not sure that this week’s decline in unemployment would have meant as much if prices had not been oversold and near support.
The bulls were also helped by a rally in the euro. There is speculation that US Federal Reserve Chairman Ben Bernanke, who will be meeting in Jackson Hole, Wyoming, on Friday, may give signs that the Fed is going to find additional ways of implementing stimulative monetary policies. The term is “quantative easing,” and it is another sign of how far the oil markets have drifted from their original purpose that we are discussing this vague and obscure term, which only someone with a MBA in banking could fully explain. Suffice it to say that it makes money more accessible and is meant to stimulate the economy. It is also not good for the US dollar, which is how it ties in with everything else under discussion on Thursday.
This complex may have more rally in it, and it might even advance for a number of sessions. The bottom line, though, is that it will need good economic news, stronger equities or a stronger euro to push oil prices higher. Fundamentally, there is absolutely no reason for oil prices to advance. In fact, the sup[ply and demand factors continue to argue for dramatically lower prices from existing levels.
FMX Newswire
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Platts oil
- Chile to hike geothermal development in bid to cut fossil-fuel use; targets 20% of electricity generation from renewables by 2020: minister.
- Korea Gas is in talks with Santos to take a stake in the Gladstone CSG-to-LNG project in eastern Australia.
- Dana posted a net profit of GBP31.36 million and urged shareholders not to respond to KNOC's cash offer before its Sep 8 presentation.
- India's GAIL is expected to import 2-3 LNG cargoes in the next quarter and the 2011-2012 (April-March) financial year, analysts have said.
- Uganda has withdrawn UK Tullow Oil's license for block 3a in the Albertine Graben area after the expiry of the block's exploration license
Bentek Energy
- Power Burn Analytic Report - U.S. Power Burn Expected to Climb Through Next Week
- Texas Observer – Implied Storage Down a 180 in Texas
- Industrial End Users Analytical Report – Continued Growth for U.S. Ethanol Production and Associated GAs Demand
- Supply/Demand Analytical Report – U.S. Injections Over Twice the MTD Average
Bloomberg
- Crude Oil Reverses Losses as Equity Markets Recover Before Bernanke Speech
- Crude Oil May Rise After Failing to Drop Below Support Level, Survey Shows
- Frontline Predicts Lower Profit After Plunge in Charter Rates for Tankers
- Korea Gas May Invest $1.5 Billion in Australian LNG Project, Yonhap Says
- Climate-Control Failures May Send Coal Trading to Record
- BP Executives Say They Didn't Know Who Had Command of Oil Rig Before Blast
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