Oil prices managed to claw their way back into positive territory on Tuesday, and even the expiring May contract went off the board in stronger fashion after hitting a five-week low of $43.83 at one point. A gradual recovery in the US stock market, coupled with a slightly weaker dollar, helped reverse the losses. Of the two variables, it was the US stock market that exerted the greatest influence on energy prices. To everyone’s relief, stocks did not greet Monday’s sharp plunge with yet more selling, but instead, opened unchanged after a number of relatively decent earnings reports came out early in the day from the likes of United Technologies, among others. The stock market than worked higher later in the afternoon after favorable comments by Treasury Secretary Geithner on the state of the US banks. The Treasury Secretary said that most banks have more capital than needed for regulatory purposes, and added that there will be a “series of options” for lenders who may need additional money at the conclusion of the Fed’s stress tests. He also said that there are signs of a “thawing” in credit markets, noting that “indicators on interbank lending, corporate issuance and credit spreads, generally suggest improvements in confidence in the stability of the system”.
In the absence of any major macro numbers out of the US on Wednesday, the EIA data out later on Wednesday should provide short-term direction for prices. Both the Reuters consensus and Andy Lebow’s projections are calling for a modest build in crude stocks, while product inventories are expected to decrease. The API issued its numbers late on Tuesday, showing a surprise drop in crude stockpiles, while distillates rose by 458,000 barrels compared to expectations calling for a 700,000-barrel draw. Gasoline stocks rose 107,000 barrels, compared with expectations calling for a 400,000 barrel decline. Prices firmed slightly on the release in after-hours trading.
In Other News from Reuters...
* Iran’s OPEC governor said the cartel may decide to cut its oil output in May if the market continued to remain oversupplied, and expressed concern that consumers are stockpiling oil due to lower prices.
* The Obama administration will make about $500 million available to Chrysler through the end of this month, as it seeks to reach an alliance with Fiat, and up to $5 billion through May to help GM restructure.
* Japan’s customs-cleared crude oil imports slumped 18.4% in March from a year ago, while imports of liquefied natural gas and coal imports also fell. Japan imported 3.68 million barrels per day of crude oil last month, with imports falling to their lowest level in 20 years on the month. In the meantime, China imported 3.85 million bpd in March, its second-highest monthly total ever, as refiners replenished stocks after import cuts in prior months. However, imports were still down 5.5% on the year.
* Mexican oil production continues its downward slide, with Pemex reporting March’s production at 2.652 mbpd, down 6.6% on the year. Exports dipped to 1.213 mbpd, down from 1.628 in March 2008.
* Angola’s June exports will reach 1.82 mbpd, an increase from May levels, and will again exceed OPEC’s targets by 300,000 bpd. Some 57 cargoes are expected to load in June.
* A Weatherford official announced that the U.S. company will start drilling in the semi-autonomous Kurdistan region of Iraq this May. With security improving, the Iraqi oil ministry hopes to lure more foreign investment in order to boost the country’s production to 6 mbpd by 2015, more than double current its current output.
* German Investor confidence rose to its highest level in almost two years in April, mirroring the uptick we saw in US confidence readings last week. The ZEW Center for European Economic Research in Mannheim said its index of investor expectations rose to 13 from -3.5 in March. This is the highest level since June 2007 and the first positive reading since July 2007. Out of Japan, exports fell at a slower pace in March, ending a four-month string of record drops, and suggesting that the recession in that country may be starting to ease. Exports slumped 45.6% from a year earlier, compared with February’s 49.4% plunge.
* The IMF estimates that distressed loans and securitized assets will total $4.1 trillion by December 2010, including, for the first time, loans and securities coming from Japan and Europe. In fact, European governments are said to be unaware of the dire situation their banks face, the IMF warned. In the meantime, US-originated loans and assets are predicted to decline in value by $2.7 trillion, up from $2.2 trillion estimated in January. The IMF bleakly predicts that even with strong state interventions “the deleveraging process will be slow and painful.”
* Venezuelan opposition leader Manuel Rosales has fled to Peru and has requested political asylum to escape corruption charges that he says are in retaliation for criticism of President Hugo Chavez.
European North Sea crude oil quotes as reported by Reuters: A May 10-12 Forties traded at dated plus 5c, roughly equivalent to June minus 83c, while a May 4-6 cargo traded at dated minus 35c. A cross-month Oseberg was offered steady at dated plus 60c. In the meantime, the loading rate for the nine main North Sea crude streams will average 2.244 million barrels per day in May, down 5.4% from 2.371 million bpd recorded in April.
U.S. gasoline/distillate quotes as reported by Reuters: In Gulf Coast trading, M2 traded at 9.75c under, down 0.5c. ULSD traded at 2.5c over, while low sulfur diesel was bid at 2c under and offered flat to the benchmark. Heating oil traded at 4.5/3.5c under, and jet fuel traded at 1c under. In New York Harbor, low sulfur diesel was bid at 0.25c under, up 1 penny. ULSD was offered at 6.5c over, down 0.5c. Heating oil was offered at 1.25c under, up 0.25c.
This report is issued by MF Global UK Limited (“MFG”) which is authorised and regulated by the Financial Services Authority. The report was prepared and distributed by MFG for information purposes only. The report contains information and opinions, which may be used as the basis for trading undertaken by MFG and its officers, employees and associated companies. The report should not be construed as solicitation nor as offering advice for the purposes of the purchase or sale of any security, investment, or derivative. The information and opinions contained in the report were considered by MFG to be valid when issued. The report also contains information provided to MFG by third parties. The source of such information will usually be disclosed in the report. Whilst MFG has taken all reasonable steps to ensure this information is correct, MFG does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at their own risk and MFG does not accept any liability as a result. Securities and derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Registered Office : MF Global UK Limited, Sugar Quay, Lower Thames Street, London, EC3R 6DU. Registered in England No. 1600658
Wisdom Financial does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational purposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Wisdom Financial. All known news and events may have already been factored into the price of the market.
All known news events are factored into market prices.
Futures Trading Involves Substantial Risk of Loss and Is Not Suitable For All Investors. Past Performance is Not Indicative of Future Results.
