When The Dollar Can’t Help
You know demand fears are running high when a break in the dollar does not help support crude oil prices. Global meltdown fears are rising as stocks fall for the eighth day in a row and traders seek safe have in gold and silver.
Bonds the previous safe haven, have been mixed because of the lack of yield as “Bond King” Bill Gross warns that sovereign bond yields at record lows aren't worth the risk. Still, oil is gaining a little support from the American Petroleum Institute (API) supply report that suggests supply may be falling back down from record highs.
The market is also skeptical about reports about a deal to resume Libyan oil supply as the situation in Libya is not very stable. The U.S. approved a 30-day U.S. airstrike mission in Libya after President Barack Obama took responsibility for not being “sufficiently attentive” to Libya after the fall of Muammar Gaddafi.
In Nigeria, oil production dropped to 1.4 million barrels a day according to the oil minister, so the answer is to start paying money to rebels to get them to stop blowing up pipelines. Bloomberg News reported that peace talks that started last week with the Movement for the Emancipation of the Niger Delta, and the resumption of amnesty payments, may do little to halt attacks on wells and pipelines by a different rebel faction, the Niger Delta Avengers, according to Dolapo Oni, a Lagos-based analyst at Ecobank Transnational Inc.
The API reported last night that U.S. crude stockpiles fell by 1.34 million barrels last week. Surprising enough most of that drop of 1.3 million barrels was in the key Cushing, Oklahoma delivery point.
That was the inverse of the surprising increase that we saw a week ago and is a sign that despite the fears of future demand woes, in the short term, demand is still strong. The API showed that gasoline demand was also strong and supply drop of 450,000 barrels and a 459.000-barrel increase in distillates.
Tropical storm Earl has been named and National Hurricane Center is issuing advisories on Earl, located in the western Caribbean Sea. It is moving westward towards the Bay Islands and Belize. It should then go over land and go over some PEMEX operations in the Bay of Campeche which may slow some operations in the Cantrell oilfield. Still, because the storm is projected to go mostly overland, it is not expected to gain too much strength.
Natural gas prices are hovering on hopes that summer will someday come to an end. Still, the market may have to get prepared for a rare summer time natural gas withdrawal. This comes as the U.S. is on track to be a natural gas net exporter for the first time in 60 years.