Economic Data Driving Energy Demand
Today features a glut of economic data across the globe. For the most part, where energies are concerned, this data will go to bolster or diminish the demand effect on the price of energies. With the overnight session revealing better than expected euro economic data and the early US data showing much of the same, the energy markets were able to shrug off the pressure from the strong US dollar.
Optimism over the Greek credit crisis has had the effect of pushing the euro sharply lower, a move that is a little curious. It does appear to be more of a strong US dollar putting the pressure on all foreign currencies rather than the falling euro putting upward pressure on the dollar. That may seem to be a bit of nuance, but it is important to note when looking at the currencies for indicators in the energy market that we identify the impetus for the major moves. Further confirmation that this is US strength driving the price discovery can be found when looking at the WTI/Brent crude spread that is currently dipping closer to 3 dollars premium Brent over WTI. As the US economy potentially out paces the overseas neighbors, then we should see this spread continue to fight back toward parity.
Globally, there appears to be little new developing from a supply standpoint. The inventories this week will be critical, particularly for the natural gas contract. Natural gas is stabilized at 2.75 to 2.80, seemingly just looking for even a modest reason to rally. That could come at Thursday’s inventory report, with July options falling off the board on Friday.
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