NEWS & EVENTS: Breaking News
01.07.2009 08:12
July 1. In global petroleum market headlines, oil prices tumbled below USD 70 a barrel Tuesday after a steep drop in US consumer confidence data in May rekindled concerns over a potential economic rebound. Benchmark crude for August delivery dipped USD 2.25, more than 3%, to USD 69.24 a barrel on MICEX after swinging between USD 69.03 and an 8-month high of USD 73.38 in early trading. In London, Brent prices plunged USD 2.25 to USD 68.74 a barrel on the ICE Futures exchange. Earlier in the session, Brent peaked at USD 73.50. As we predicted, Tuesday, the last day of the month, saw a major sell-off as investors attempted to book profit at the end of Q2. Major equity benchmarks also turned lower and the dollar rose after the Conference Board's consumer confidence index showed households felt worse about their situation, fueling a bout of risk aversion. Other gloomy economic data showed the British economy shrank at its fastest pace in more than 50 years in the first three months of 2009 and has been in recession for a whole year. In addition, jobless rates in No. 3 oil consumer Japan rose to a new 5.5-year high in May and job availability sank to a record low, further dampening hopes for an economic recovery. When the market gets scared about the economy, people run back to the dollar to avoid risk. The US dollar rose against the euro, weighing on commodities denominated in the greenback, with the Reuters-Jeffries CRB index commodity benchmark trading down 1.68%. Driven by hopes of a global economic recovery, oil prices are on track to post a near 50% increase in Q2, the highest quarterly percentage gain since 1990. Earlier, oil prices surged on unusually high Asian trading volumes, which some traders attributed to big fund players in the market. Oil markets were also awaiting US inventory data from the American Petroleum Institute, due Tuesday afternoon, expected to show a draw in crude stockpiles and a build in product inventories as the world's top consumer heads into the July 4 holiday weekend. We estimate that US crude stockpiles showed a 5 mn-bbl build barrels last week, while gasoline stocks likely showed a build of 2 mn barrels and distillate stocks up 1.5 mn barrels. The US Energy Information Administration will release its weekly inventory report at 6:30 pm MSK today. Moving forward, we expect to see wide price swings and high volatility as long as uncertainty prevails over the state of the US and global economy. Crude is back above USD 70 this morning after last night’s API inventory data showed a much larger-than-expected build in crude stockpiles last week, i.e. down 6.8 mn bbls. If confirmed by EIA later today, we could see prices head north again. Such strong data should help offset the effects of the soft consumer confidence data that came out yesterday.
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