All eyes are again focused on Greece and whether or not an eleventh hour accord can be met. There are many moving parts to this with the European Commission most recently this morning proposing a last minute deal to thwart off default on payments due today. The timeline for this event is not exactly clear but would be something to the effect of a default, should it occur, today, and then some further decision to be made via a referendum on Sunday, July 5th. The most salient point here is obviously whether or not Greece remains in the EU.
Some fear if Greece leaves the EU the possibility of a domino effect for other troubled nations in Europe could manifest itself. Others feel that a culling of the heard effect will be had, thus making the Greek-less EU a stronger entity. How this all plays out are merely theories at this point but it does appear to have shifted a bit to the idea that maybe the EU needs Greece a little more than Greece needs the EU. The anti-austerity movement that ushered in the new leadership in Greece may very well be pining for the days of the Drachma again. As Milton Friedman predicted, this unilateral currency has had the effect of taking away a sovereign nations greatest monetary tool which is currency manipulation. Devaluation of a currency to spur a lagging economy and create jobs, while not a great option, is certainly utile in times of crisis yet just not an option when the currency is so broad based as the euro currency is.
At some point we will see in real time what this all does to the demand picture for energies. Uncertainty is usually a drag on demand though with energies there can be a fear bid that takes place should things turn from bad to worse. Therefore, one can see why there has been little real breakout reaction in crude or other energy commodities due to a lack of clarity and competing fundamentals.
This is a short week in the US with the holiday coming up and the government has moved its jobs report forward to Thursday of this week. With inventories this afternoon and tomorrow for crude and Thursday for natural gas, it looks to be a heavy event laden week starting later today. However, the Greek scenario will most likely remain the focus and keep the price discovery hostage at least until the start of next week when there is a chance for actual resolution rather than rampant speculation.
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