Phil Flynn: Terror Premium Is A Cost Of Doing Business

What was striking in the Friday reports about the attempted mail bomb terror attack was the market's indifference. The market has already priced in a certain amount of terror possibilities and in a way we are paying for it every day. We are paying for it in the cost of insurance and freight and we are paying for it in terms of even higher commodity prices. It's sad that we have come to expect this type of evil in the world. Today oil is getting a boost out of strong data from China and India.

The Chinese official purchasing manager's index rose to a six-month high in October to 54.7 from 53.8 in September. The market was only looking for a 52.9 reading. The strong number brought back the risk appetite and rallied the oil and broke the dollar. The HSBC version came in at only 54.8 but did have one of the biggest month to month increases in history. With readings like these it is no wonder that China is trying to slow its economy down. The main driver for the market this week will be the Fed. Now everyone knows that the Fed and the size of its massive QE2 program and how it is implemented will be the main factor in the pricing of oil and all other commodities.

People are finally getting the fact that it has been the Fed and the different phases of this economic crisis that has driven the cost of oil, NOT SPECULATORS! US product exports should be strong again in this week’s reports. Oil Inventories are still at the highest level since the 1930s! Look for crude to be down 2.0 million barrels, gas down 2.0 million, distillates down 2.5 and runs up 0.5.

Watch Phil on the Fox Business Network every day. And get his trades by calling him at 800-935-6487 or email him at pflynn@pfgbest.com.


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Crude Oil Declines as Forecast Gain in U.S. Inventories Signals Slowing Demand

Crude oil declined in New York on speculation slowing fuel demand will result in higher inventories in the U.S., the world’s largest crude consumer. Futures earlier dropped as much as 0.6 percent as the dollar index gained, limiting the investment appeal of commodities. An Energy Department report tomorrow may show crude inventories rose 1.5 million barrels last week, according to a Bloomberg News analyst survey. “If you look at the inventory expectations, crude supplies should climb, so fundamentally there’s not much support,” said Serene Lim, an energy and commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The market will be determined by the price moves in the dollar.”

The December contract fell as much as 47 cents to $82.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.20 at 2 p.m. in Singapore. Yesterday, it advanced 83 cents to $82.52, the highest close since Oct. 18. Prices are up 3.6 percent this year. Workers at three French oil refineries voted to return to work as a contested pension bill neared parliamentary approval and the government warned that fuel shortages were hurting the economy. The nation’s eight remaining active plants are either on strike or shut because of a lack of crude. The dollar traded at $1.3972 against the euro from $1.3965 in New York yesterday, having earlier risen to $1.3908. The dollar index, which tracks the greenback against six major currencies, rose as much as 0.3 percent, and was little changed at 77.091 from 77.103 yesterday.

Strikes ‘Psychological’
“The oil market might be taking a bit of a breather,” said ANZ’s Lim. “I doubt the strikes had a huge effect overall on the market, but it was more a psychological impact from the shutdowns.” U.S. gasoline supplies probably climbed by 625,000 barrels last week, according to the estimates in the Bloomberg survey. Supplies of distillate fuel probably decreased for a fifth week as distributors took deliveries before winter and exports to Europe increased, the Bloomberg News survey shows. Brent crude for December settlement traded at $83.34 a barrel, down 20 cents, on the ICE Futures Europe exchange in London. Yesterday it rose 58 cents, or 0.7 percent, to $83.54.

Bloomberg Reporter Christian Schmollinger can be contacted at christian.s@bloomberg.net


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Crude Oil Slip From a 5 Month High as Stocks Take a Breather

Crude oil tumbled from a five month high after the dollar rebounded versus the euro and U.S. equities declined, wiping out an early advance. Oil headed for the biggest drop in three weeks as the greenback climbed against the common currency for the first time in three days, reducing the appeal of commodities as an alternative investment. The Standard & Poor’s 500 Index decreased for a second day as raw-material prices fell, sending producer shares lower.

“The dollar and equities are the main drivers,” said Kyle Cooper, director of research for IAF Advisors in Houston. “What happens with inventories and demand isn’t that important.” Crude oil for November delivery fell $1.56, or 1.9 percent, to $81.67 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil dipped as much as $2.23 to $81, and reached $84.43 earlier today, the highest level since May 4.

Brent crude oil for November settlement declined $1.68, or 2 percent, to $83.38 a barrel on the ICE Futures Europe exchange in London. It reached $86.02, the highest level since May 4. The U.S. currency rose after applications for U.S. unemployment benefits unexpectedly fell. Jobless claims dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10, Labor Department figures showed today in Washington. The dollar climbed 0.1 percent against the euro to $1.391 after reaching an eight month low of $1.4029 in New York.....Read the entire article.


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Crude Oil Trades Near Five Month High as Dollar Drops, U.S. Fuel Supplies Fall

Crude oil rose for a third day in New York as the dollar extended its decline against the yen and the euro, enhancing the investment appeal of commodities, and after a U.S. government report showed a drop in gasoline stockpiles. Futures climbed as the U.S. currency fell to a 15 year low against the yen and an eight month low against the euro amid speculation the U.S. Federal Reserve will expand credit easing to sustain the economic recovery. The U.S. Energy Department said yesterday supplies of motor fuel slipped more than forecast by a Bloomberg News survey.

“We’re seeing tremendous dollar weakening,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “That’s what we saw throughout 2009, which made oil rise from below $40 to $70. This correlation disappeared all year until now, so all commodities are rising.” Oil for November delivery rose as much as 72 cents, or 0.9 percent, to $83.95 a barrel in electronic trading on the New York Mercantile Exchange. It was at $83.73 at 12:56 p.m. London time. Brent crude for November settlement rose 46 cents, or 0.5 percent, to $85.52 a barrel on the ICE Futures Europe exchange in London.

Futures reached their highest price since May 4 yesterday after the Energy Department reported gasoline supplies fell 2.65 million barrels to 219.9 million. They were forecast to decline 250,000 barrels, according to a Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 1.12 million barrels.......Read the entire article.

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Oil Fails to Benefit from USD Weakness

Dataflow continued to weigh on the dollar, pushing other major currencies higher, yesterday. With the exception of the US energy sector, commodities were buoyed by a weaker dollar. Comex gold for December delivery soared to as high as 1298 before settling at 1292.1, up +1.40%. Silver rallied with the benchmark contract closing above 21 for the first time since mid-March 2008. In the base metal complex, copper surged to a 5-month high while tin jumped after Indonesia reported decline in exports in August. US oil prices erased gains made earlier in the day as oil inventories unexpectedly increased despite shutdown of the Enbridge pipeline during the week. WTI crude oil for November delivery ended the day at 74.71, down -0.35%. Prices for oil products also dropped with heating oil and gasoline losing -0.61% and -0.96% respectively.

The US house price index surprisingly contracted -0.5% m/m in July, following a downwardly revised -1.2% decline in the prior month. The market had anticipated a milder drop of -0.1%. Moreover, the MBA's new purchase mortgage applications index plunged3.3% last week, with the 4-week average down -37% y/y. The readings reminded investors the vulnerability of the housing market and would be taken as a factor pushing the Fed closer to further easing. The dollar tumbled, weakening against major currencies except for Canadian dollar. EURUSD added more than +1% despite disappointments from Eurozone's industrial orders and consumer confidence index. GBPUSD climbed +0.3% even though the BOE minutes hinted the central bank might move towards further easing.

Shrugging off the threat of further intervention, Japanese yen rose for a 3rd day against the US dollar. Concerning commodity currencies, AUDUSD hit a 2-year high and is approaching parity as RBA signaled further rate hike might be earlier than market forecasts. NZDUSD also edged higher yesterday but gains were erased in Asian session today as 2Q10 GDP growth missed expectations. Canadian dollar was the only major currency that fell against the US dollar yesterday. Canada's retail sales contracted -0.1% n/n in July after gaining +0.1% in the prior month. The market had anticipated a growth of +0.6%. Excluding auto, the decline extended to -0.5% from -0.3% in June.

Currently hovering around 74/75, crude oil price has dropped almost -6% year to date and around -15% from this year high of 87.15. However, OPEC appears satisfied with the price. The group will be meeting on October 14 but OPEC President Wilson Pastor said there are ‘no plans to change OPEC policies regarding production or prices… The world economy is growing, it's exiting the recession and as the economy grows, that will go hand in hand with robust growth in oil prices'. The comment was made although the group downwardly revised the 2011 demand forecast for its oil output earlier this month. Notwithstanding expansion in non OPEC production and abundant inventories in advanced economies, many OPEC members have been producing exceeding their quotas. In August, the 11 members bearing quotas produced 26.80M bpd, compared with the limit of 24.85M bpd. Compliance level climbed slightly to 53.5% from 52.6% in July but remained significantly lower than78.6% in March 2009.

Nigeria's Petroleum Minister Diezani Alison-Madueke said the country will ask OPEC to increase its quota from 1.673M bpd. The country produced 2.01M bpd in August. In our opinion, lack of commitment from OPEC members to control production in an environment of high oil inventory and flaggy demand in advanced economies would damp the outlook of crude oil price.

Courtesy of ONG Focus.....

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How Do Current Crude Oil Inventories Stack up Against The Recent Past?

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Crude Oil Rises After U.S. Pipeline Shut, Report Shows Import Surge by China

Crude oil rose the most in six weeks after a pipeline that carries Canadian crude to refineries in the U.S. Midwest was closed because of a leak. Futures increased as much as 3.1 percent after Enbridge Energy Partners LP shut its Line 6A, part of a system that can transport 670,000 barrels a day from Canada. Chinese customs figures showed that net imports of crude climbed by 10 percent in August from the previous month.

“It’s all about Enbridge,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “It’s a big line, which supplies a bunch of refineries in the Midwest. Depending on how long it is shut, this could put a big-sized crimp on supplies in the region.” Crude oil for October delivery climbed $2.12, or 2.9 percent, to $76.37 a barrel at 11:07 a.m. on the New York Mercantile Exchange. The contract touched $76.56, the highest level since Aug. 17. Futures are up 2.4 percent this week.

Oil surged the most since Aug. 2, when prices rose above $81 a barrel for the first time since May as a global equity rally bolstered optimism the economy is strengthening Brent crude oil for October settlement climbed 74 cents, or 1 percent, to $78.21 a barrel on the London based ICE Futures Europe exchange. Brent’s premium over New York oil shrank following the pipeline leak. The London-traded contract was $1.84 higher than Nymex oil, compared with a premium of $3.65 on Sept. 7.

Crews are investigating the pipeline situation, said Glenn Herchak, an Enbridge spokesman. He declined to provide information on what the line was carrying and if it was operating at full rates.....Read the entire article.

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EIA Natural Gas Weekly Update

Price changes during the week were mixed, but in most areas, these changes were moderate. The Henry Hub price rose slightly from $3.73 per million Btu (MMBtu) on Wednesday, September 1, to $3.81 per MMBtu yesterday. The report week was shortened due to the Labor Day holiday.

At the New York Mercantile Exchange, the price of the October 2010 futures contract rose about 5 cents, from $3.762 per MMBtu on September 1 to $3.814 per MMBtu on September 8.

Working natural gas in storage as of Friday, September 3, was 3,164 Bcf, following an implied net injection of 58 Bcf, according to EIA’s Weekly Natural Gas Storage Report.

The West Texas Intermediate crude oil spot price rose 68 cents from $73.97 per barrel, or $12.75 per MMBtu, to $74.65 per barrel, or $12.87 per MMBtu.

The natural gas rotary rig count, according to data released by Baker Hughes Incorporated, rose by 4 to 977 as of September 3 (see “Other Market Trends”).

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Crude Oil Advances After Unexpected Decline in U.S. Stockpiles

Crude oil rose to a three week high after the government reported an unexpected decline in U.S. stockpiles and applications for unemployment benefits fell, bolstering optimism that the economic recovery will accelerate. Supplies dropped 1.85 million barrels to 359.9 million in the week ended Sept. 3, the Energy Department said today in a weekly report. Inventories were forecast to climb by 1 million barrels, according to a Bloomberg News survey of analysts. Initial jobless claims fell by 27,000 to 451,000 in the week ended Sept. 4, Labor Department figures showed.

“The oil statistics today were bullish to neutral,” said Carl Larry, president of Oil Outlooks and Opinions LLC in Houston. “The economic numbers, in particular the jobless claims, were an encouraging sign. The main driver of the market right now is the economy.” Crude oil for October delivery rose 94 cents, or 1.3 percent, to $75.61 a barrel at 11:23 a.m. on the New York Mercantile Exchange. The contract reached $75.96, the highest level since Aug. 19.

Brent crude oil for October settlement climbed 19 cents to $78.36 a barrel on the London based ICE Futures Europe exchange. Gasoline supplies declined 243,000 barrels to 225.2 million. Stockpiles were forecast to fall 1 million barrels, according to the median of 16 responses from analysts surveyed by Bloomberg News. Initial jobless claims dropped by 27,000 to 451,000, Labor Department figures showed today in Washington. Benefits applications were projected to decrease to 470,000 from a previously reported 472,000 for the prior week, according to the median forecast of 46 economists in a Bloomberg News survey.....Read the entire article.

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Crude Oil Falls for Second Day as Dollar's Gain Dims Appeal of Commodities

Crude oil fell the most in a week as the euro tumbled against the dollar on speculation that Europe’s debt crisis may worsen. Oil dropped as much as 2.6 percent after German factory orders unexpectedly declined in July, causing the euro to weaken the most since Aug. 11. Equities declined, ending the Standard & Poor’s 500 Index’s longest winning streak since July, on concern the European situation will delay the global economic recovery.

“The euro’s broken down and the dollar’s gotten stronger,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “That’s helping to put some pressure on oil.” Crude for October delivery lost 60 cents, or 0.8 percent, to $74 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Earlier, it touched $72.63 a barrel, the biggest single day decrease since Aug. 31. Prices have dropped 6.8 percent this year.

U.S. oil markets were closed yesterday for the Labor Day holiday. Yesterday’s electronic transactions will be booked with today’s trades for settlement purposes. The euro fell 1.3 percent against the dollar to $1.2707 from $1.2876 yesterday, curbing the appeal of commodities as an alternative investment. The euro has declined 1.5 percent since Sept. 3. The S&P 500 lost 0.8 percent to 1,096.24, snapping a four day rally. The Dow Jones Industrial Average fell 72.73 points, or 0.7 percent, to 10,375.20.

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Daryl Guppy: Crude Oil Turns Bearish, $54 May Be Downside Target

From guest blogger Daryl Guppy....

As recently as three weeks ago we remained bullish on oil. This view has now changed with a confirmation of a longer term chart pattern. Nymex oil is now showing a bearish pattern. There are still additional moves required to fully confirm the pattern but the development of bearish pressure is increasing. The behavior of oil in 2009 to 2010 has been dominated by two features. The first is the residual power of the historical support and resistance levels. The most important of these are between $78 and $88. The three recent tests near resistance at $88 created a bullish outlook with a potential to breakout and move to the next resistance level near $98.

The second feature was the development first of an up sloping trend channel. The lower edge of this channel was broken in May and a new lower parallel up trend channel developed. This lower channel has recently also been broken. It is the pattern of these breaks that point the way to a head and shoulder pattern. The rapid fall from $80.00 and the failure of the rebound is initial confirmation of the head and shoulder trend reversal pattern. If fully completed, it would put a downside target for oil near $54.

The pattern is confirmed in two ways. First when the price fails to rally above $81, which is the height of the right shoulder. This failure confirms the development of the right shoulder of the pattern. The second confirmation is a move below $65.00. This is the current projection value of the neckline in the head and shoulder pattern. Move below this level is final confirmation of the head and shoulder pattern.

Another confirmation, albiet minor, is a sustained close below historical support near $68. This has been a string support area since December 2009 and a major feature in the 2010 oil market behaviour. The development of the right shoulder has moved the NYMEX oil market out of the slightly bullish sideways consolidation band and into bearish territory. Traders use more caution in the long side of this market and are more aggressive in talking the short side.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders Guppy Traders.Com

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Phil Flynn: Demand Jam

According to the Energy Information Agency heading into the Labor Day holiday weekend, U.S. retail gasoline prices fell three in a row with an average price of $2.68 per gallon which was the lowest level of the 2010 peak summer driving season and the second lowest price at this point in the past five summers.

Still not even that may save the demand side of the equation. With storms battering up and down the East Coast, demand for gasoline was most likely impacted negatively. We are in the heart of the shoulder season and demand will continue to be very weak. We still maintain a bearish bias but still recommend playing the ranges.

The storms in the Atlantic never seem to end. There are 3 tropical waves that currently have about a 30% chance of becoming a tropical cyclone. At this time the storms do not seem to be a threat still they will bear watching.

What the bears really need to do is watch the me on the Fox Business Network and the bulls should join in too. If you don’t get it you need too!

Sign up for Phil's daily energy report and his daily buy and sell points on all of the major commodities by emailing him at pflynn@pfgbest.com.

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Crude Oil Futures Fall as U.S. Jobs Report Signals Slowing Economic Recovery

Crude oil fell as initial U.S. jobless claims bolstered concern that the country’s economy will be slow to recover, crimping fuel demand. Oil slipped as much as 1.1 percent as a report showed that the number of Americans seeking unemployment benefits decreased by 6,000 to 472,000 in the week ended Aug. 28. U.S. crude oil stockpiles climbed 3.43 million barrels to 361.7 million last week, an Energy Department report showed yesterday.

“Although jobless claims dropped a little, they are still above 470,000, which is a sign that the economy is still in a lot of trouble,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Crude oil for October delivery fell 57 cents, or 0.8 percent, to $73.34 a barrel at 9:07 a.m. on the New York Mercantile Exchange.

Brent crude oil for October settlement lost 94 cents, or 1.2 percent, to $75.41 a barrel on the London based ICE Futures Europe Exchange. The increase in crude oil stockpiles left supplies 11 percent above the five year average for the period, according to the department. “U.S. inventories are pretty enormous,” said Alexander Ridgers, head of commodities at London based CMC Markets, which handles more than $150 million a day in U.S. crude contracts.

Overall petroleum stockpiles, a combination of oil and fuel supplies, climbed 4.04 million barrels, or 0.4 percent, to 1.14 billion, the highest level since at least 1990, according to yesterday’s report. “Supplies are ample,” McGillian said. “Yesterday’s inventory report showed that petroleum stockpiles were at a record high for a third consecutive week.”

Reporter Mark Shenk can be reached at mshenk1@bloomberg.net

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AP: Crude Oil Reserves Expected to Grow

The government is expected to report Wednesday a 1.1 million barrel increase in commercial crude oil supplies for the week ended Aug. 20, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration releases its weekly report at 10:30 a.m. EDT.

Platts said analysts predicted gasoline stockpiles will shrink by 875,000 barrels, distillate stocks, including diesel and heating oil, will increase by 950,000 barrels and refinery utilization will dip by 0.5 percentage point to 89.5 percent.

A reading above or below estimates can influence market trading.

For the week that ended Aug. 13, the department said crude supplies shrank by 800,000 barrels to 354.2 million barrels; gasoline inventories were nearly unchanged at 223.3 million barrels and inventories of distillate fuel rose by 1.1 million barrels to 174.2 million barrels.


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Crude Oil Falls in New York Before Government Report on U.S. Inventories

Crude oil fell to its lowest price in seven weeks before a report forecast to show that U.S. inventories of crude increased as summer driving demand ebbs. The U.S. Energy Department will probably report today that crude stockpiles gained 300,000 barrels last week after three weeks of declines, a Bloomberg survey showed. Oil extended losses after the U.S. Commerce Department reported a smaller increase in durable goods orders than analysts had predicted.

“U.S. consumption is still very low; product inventories are sky-high,” said Tobias Merath, Zurich based head of commodity research at Credit Suisse Group AG. “In every market we’ve seen fears of a double dip recession and oil has been particularly affected.” Crude for October delivery declined as much as 53 cents, or 0.7 percent, to $71.10 a barrel, in electronic trading on the New York Mercantile Exchange, its lowest since July 6. It traded for $71.36 as of 1:38 p.m. London time. Brent crude for October delivery dropped 20 cents to $72.18 a barrel on the London based ICE Futures Europe Exchange.

Figures from the Commerce Department showed that bookings increased 0.3 percent, compared with the 3 percent median estimate of 75 economists surveyed by Bloomberg News. Excluding transportation equipment, demand unexpectedly fell. The Energy Department will issue its weekly report at 10:30 a.m. local time in Washington D.C. today. U.S. gasoline stockpiles probably declined 450,000 barrels in the week ended Aug. 20, based on the median estimate from 18 analysts surveyed.....Read the entire article.

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Crude Oil Continues it's Slide....Lower Prices Still Likely

Crude oil closed lower on Thursday as it extends yesterday's breakout below the 20 day moving average crossing at 79.05. Renewed concerns over both the domestic and world economy and the negative ramifications of potential lower world demand continues to weigh on the energy complex.

The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If September extends this week's decline, the reaction low crossing at 74.70 is the next downside target. Closes above the 10 day moving average crossing at 80.36 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 79.05
Second resistance is the 10 day moving average crossing at 80.36

First support is today's low crossing at 75.52
Second support is the reaction low crossing at 74.70

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Commodities Firm While Equities Fall

Commodities were generally firm after strong European confidence data and bigger than expected decline in initial jobless claims in the US. WTI crude oil price rebounded strongly and pared most of the losses made over the past 2 days amid USD's weakness. The front month contract surged to as high as 78.89 before closing at 78.36, up +1.78%. Natural gas rallied as gas storage rose less than expected in the US while gold price also climbed higher and settled at 1168.4, up +0.69%.

The US Energy Department reported gas inventory added +28 bcf to 2919 bcf in the week ended July 23. Stocks dropped -94 bcf from the same period last year but remained +239 bcf (+8.9%) above the 5 year average of 2680 bcf. Gas price extended the rally for a 4th day and settled at 4.827, up +2.31%.

The dollar plunged to a 12 week low against the euro as economic data in the US has been mixed but biased to the downside while that in the Eurozone has shown improvement after enduring a tough period. At the same time, concerns over sovereign crisis in peripheral European countries continue to diminish as debt-ridden economies have been actively implementing fiscal consolidations measures and economic indicators have been better-than-expected.

Initial jobless claims slipped -11K to 457K (consensus: 460K) in the week ended July 24. The drop also brought the 4 week moving average down to 452.5K, the lowest since the beginning of May, from 457K. While the reading was better than expected, the sluggish decline signals that the job market is improving very slowly.

Stock markets failed to be stimulated by the jobless claims report as corporate earnings in the consumer sector were uninspiring. Kellogg reported a -15% decline in net income to $302M in the quarter ended July 3. The management also revised down its profit forecast for the year due to cereal recall last month. Black & Decker, a diversified worldwide supplier of tools and solutions with sales mainly in the US, revised down its sale guidance for 2010. DJIA and S&P 500 fell -0.3% and -0.4% respectively.

Focus of the day is US' GDP report. The economy probably grew by an annualized +2.5% q/q in 2Q10, an ease from +2.7% in 1Q10 and +5.6% in 4Q09.

From Oil N' Gold Focus Reports

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Crude Oil Rises for a Second Day on Optimism Fuel Demand Will Increase

Crude oil rose for a second day in New York on optimism that China’s expanding economy and a forecast that U.S. crude supplies declined last week will show signs of improving fuel demand.
Oil gained as China’s stocks advanced for a second day as rising domestic consumption boosted the earnings of automakers. U.S. crude inventories probably dropped in the seven days ended July 16, the fourth consecutive week of declines, a Bloomberg News survey showed before a Department of Energy report tomorrow.

“China’s upside really is its restocking ability and its underlying economic growth, I can’t see too much weakness in that market,” said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. Crude oil for August delivery gained as much as 37 cents, or 0.5 percent, to $76.91 a barrel in electronic trading on the New York Mercantile Exchange, and was at $76.80 at 1:59 p.m. Singapore time. Yesterday, it rose 53 cents, or 0.7 percent, to $76.54. The August contract expires today.

The more active September contract increased 22 cents, or 0.3 percent, to $77.12 a barrel. Futures have declined 3.4 percent this year. The dollar was at $1.2972 per euro at 1:46 p.m. Singapore time from 1.2942 in New York yesterday. A weaker dollar increases the investment appeal of commodities like oil. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 43.85, or 1.8 percent, to 2,519.28 as of 1:19 p.m. local time, set for the highest since June 28.....Read the entire article.

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Crude Oil Drops a Fourth Day Amid Concern Slow Recovery Will Hurt Demand

Crude oil declined for a fourth day in New York after confidence among U.S. consumers slumped, adding to concerns a recovery in fuel demand may falter in the biggest energy consuming nation. Oil dropped after the Thomson Reuters/University of Michigan preliminary consumer sentiment index for July fell to 66.5 from 76 in June, the lowest level since August. The gauge was projected to fall to 74, according to a survey of economists by Bloomberg News.

Crude oil for August delivery dropped as much as 51 cents, or 0.7 percent, to $75.50 on the New York Mercantile Exchange. It was at $75.74 at 8:27 a.m. Sydney time. The contract fell 61 cents to $76.01 on July 16. Futures have declined 8.2 percent since the start of the year. U.S. equities dropped on July 16 after the slump in consumer confidence and lower than estimated revenue at companies from Bank of America Corp. to General Electric Co. The Dow Jones Industrial Average declined 2.5 percent and the Standard & Poor’s 500 Index slipped 2.9 percent.

The Federal Reserve Bank of New York reported last week that its general economic index fell to 5.1 in July from 19.6 the prior month. The Federal Reserve Bank of Philadelphia’s general economic index declined to 5.1 this month, the lowest level since August 2009, from 8 in June. Brent crude oil for September settlement fell 72 cents, or 0.9 percent on July 16, to end the session at $75.37 on the London-based ICE Futures Europe exchange.

Reporter Mark Shenk can be reached at mshenk1@bloomberg.net Ben Sharples at bsharples@bloomberg.net


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Phil Flynn: Drivers Start Your Engines!

Drivers start your engines! Let the summer driving season begin. Despite all the talk of $4.00 a gallon gasoline this summer, more and more it looks as though retail gasoline prices have peaked for the season. Even yesterday's drawdown in supply, drop in refinery runs and gasoline production runs might be expected as gas goes up on the racks as refiners and retailers get ready for the official kickoff of the summer driving season on the Memorial Day weekend.

The Energy Information Agency, that awesome division of the Department of Energy, reported a steeper than expected drop in gasoline supply by saying that it fell by 2.8 million barrels last week against a backdrop of falling refinery runs which fell 1.2 percent to 88.4 percent. Gasoline production also fell, averaging 9 million barrels per day. Yet at the same time the report reminded us of our abundance as total gasoline supply is still well above the fiver year average.

And it is not like the refiners have no incentive to produce more gas. They absolutely do as the gas crack, according to Bloomberg News, is at a profit for refining oil into gasoline and it rose to a 15-month high. Besides as Bloomberg also points out, the bulk of last week’s gasoline drawdown was on the West coast where supply fell by a whopping 2.1 million barrels and was most likely caused by the deadline in California to switch to the summer grade blends by May 1, 2010.

Increasing gasoline prices as of late have really been a function of rising oil prices which according to the EIA is about 69% of what you pay for in a gallon of gasoline. We know that crude has risen as of late despite more than ample supply as it was being impacted by the weakness in the dollar and the global economic crisis as a whole. The Energy Information Agency, in their Short Term Energy Outlook, predicted that EIA forecasts for regular-grade motor gasoline retail prices will average $2.94 per gallon during this summer's driving season (the period between April 1 and September 30), up from $2.44 per gallon last summer. The summer gasoline price forecast is up very slightly ($0.02) from last month.

As far as oil goes, we have the International Energy Agency lower demand expectations and OPEC cheating on the rise. What is wrong with this picture here? Very bearish!


Phil can be reached at pflynn@pfgbest.com And be sure to watch him every day on the Fox Business News channel.


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