Wednesday January 7, 2009
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A report from the Department of Energy this morning, which showed that U.S. commercial crude oil inventories increased by 6.7 million barrels in the week ending 01/02/09, from the week prior, sent crude oil futures for February delivery, plunging $5.95 to close at $42.63 on the day.

This was the lowest close since December 30, 2008, and the biggest one day drop since September 24, 2001.

According to the DOE, with the 6.7 million barrels increase, crude oil inventories now stand at 325.4 million barrels and this puts U.S. crude oil inventories above the upper limit of average levels for this time of year.

Tags: Crude Oil Inventories  Oil Futures  Oil Prices

It seems the honeymoon might already be over. On Monday 09/22/08, stocks fell on concerns that the government plan to bailout financial companies, by buying up the bad mortgages and other assets weighing down their balance sheet, will not halt the downward spiral towards a worsening economy.

The plan which is estimated to cost at least $700 billion dollars caused the dollar to fall against major currencies. If implemented, the plan will drastically increase the liabilities of the U.S. government and that raises concerns amongst those who buy U.S. government bonds.

As a result, foreign investors are now worrying about whether the U.S. is the safest place for them to put their money.

With the drop in the dollar and the fact that Monday was an expiration day for oil futures, oil for November delivery, surged $16, closing at $109.37 on the futures markets. It was only last week that equity investors were celebrating oil falling below $95. This was the largest one day gain in oil prices and oil for October delivery which was expiring at the end of trading on Monday, actually spiked up $25.45 to $130 per barrel but then settled at $120.92, up $16.

The broad based decline in stocks caused steep losses across all the major indices, with the Dow Jones Industrial Averages losing 372.75 points (3.27%) to close at 11,015.69, Nasdaq lost 94.92 points (4.17%) to close at 2,178.98 while the S&P 500 index lost 47.99 points (3.82%) to close at 1,207.09.

 Tags: Stock Market  Dow Jones  Nasdaq  S&P 500

Seeking to stem the recent rapid decline in oil prices, OPEC ministers meeting in Vienna, reached an agreement overnight, to produce 28.8 million barrels of oil a day a day. This represents a shortfall of about 520,000 barrels a day from current production level. As a result, oil prices are rebounding, climbing a dollar to the $104 level in electronic trading.

The Energy Department will be releasing Crude Oil Inventories at 10:35 AM today, and being that this week’s report will reflect the effects of the hurricane Gustav related safety shutdowns, we may see a shortfall that may be bullish for oil, causing a further rise in oil prices.

Tags: OPEC  Oil Prices

At 10:35 AM today, we will be getting the Crude Oil Inventories numbers for the week ending 09/06/08. This will be the first report to reflect the effects of hurricane Gustav and depending on whether or not Wall Street wants to discount this special circumstance, we could see a spike in oil prices. Should oil prices rally, we might see further declines in stocks.

Coincidentally, FEDEX (FDX) after the close of market on Tuesday, upped its earnings guidance for Q1 2009 as a result of falling oil prices and the stock surged over four points in after hours trading.

Lehman Brothers (LEH) will also be front and center as it will be releasing what it terms “Key Strategic Initiatives” and its Q3 2008 results, which it is releasing a week early, at 7:30 AM today. Since Lehman (LEH) is currenty on life support, this news will be dictating direction for the markets today and depending on whether Wall Street deems the key strategic initiatives good enough to help keep Lehman afloat or not, we could see financials stage a rally, taking the rest of the market along for the ride, or further declines for the markets.

Tags: FEDEX  Lehman  OPEC

After a precipitous fall yesterday on continued credit concerns, stock market futures are indicating that the markets will rebound and open higher today. However, traders need to make sure they do not get caught in a bear trap by buying on a fake rally.

Any gains we get in early trading might all evaporate by 10 AM, as news from the economic front kicks in. At that time, we will be getting both the August Consumer Confidence numbers from the Conference Board, which gives us an insight into the mindset of the American consumer as well New Home Sales from The Commerce Department’s Census Bureau. We will also be getting the minutes from the last Federal Open Market Committee meeting on August 5. Unfortunately however, that’s not until 2 PM.

Its not likely that the consumer’s confidence is increasing and with regards to home sales, even though existing home sales for July, which were reported yesterday rose 3.1% against a forecasted 1.6% rise, we don’t expect New Home Sales to fare as well. The strong rise in existing home sales was due to the continued fall in home prices and the desperation of home sellers.

While homebuilders are also having a tough time, new homes do not have as much leeway in pricing as do existing homes, so the numbers should continue mirroring the weakness we are experiencing in the housing markets. So all things considered, the markets should move to the downside after the numbers.

Should the indicated gains hold when stocks start trading, traders might want to take the opportunity to lock in any gains if any on their existing short-term trades, or look for stocks to short among those that might shoot up in early trading.

We are in a bear market and we need to be constantly cognizant of that fact. You can buy on dips, but be sure to take profits when presented with the opportunity. For instance, with the drop in stocks yesterday, towards the close of the day, we sent out an alert to subscribers of our Options Capitalist trading advisory service, to buy the Apple September 175 calls. We expect to be out of those by next Monday at a nice profit. Apple was down $4.24 from Friday’s close and the decline was a good buying opportunity.

After climbing just $0.52 yesterday in regular trading, oil is down in early trading today – off $1.76 to $113.35 on a strengthening dollar, and that could provide impetus for a bullish day in stocks, but wait for the economic calendar to play out and if getting into the market, tread carefully and remember to lock in profits when you get them.

tags: new home sales FOMC minutes oil prices

In this bear market when stocks should be falling, as they tend to do in a bear market, it seems Wall Street has been looking for any reason to move stocks higher. As a result, we’ve had quite a few impressive bear market rallies.

We recently saw stocks surge on a strengthening of the dollar, which has been rallying because Eurozone economies are now seen as weakening. The implications or more accurately, the interpretation of that data by Wall Street is that the Eurozone is weakening after the U.S., so the U.S. will come out of its economic malaise ahead of the Eurozone. Secondly, even though the reality is that the U.S. economy is also hurting, with the Eurozone “now” weakening, those who would be inclined to invest in European stock markets, might now look towards the U.S.

With a tendency to adopt a view like that Wall Street just got handed an incredible gift overnight, from the United Kingdom. The Office for National Statistics in the United Kingdom, said sequential economic growth for the second quarter was unchanged from the first. This was against a forecast of a growth of .02%

The lack of growth in the UK economy in the second quarter abruptly puts a stop to sixteen years of sequential quarterly growth. In the period, manufacturing in the UK fell by 0.8%, while services grew just 0.2% and household spending fell by 0.1%. As a whole, the economy grew 1.4% from Q2 2007, against a forecasted growth of 1.6%.

This should cause the dollar to rise against the British Pound and we could then see a further weakening of the Euro against the dollar as well. Should the dollar rally strongly, we will see a drop in crude oil prices, which in the absence of any major negative economic news, will then lead to a rise in equities. Considering the state of our economy and the worries over major financial companies, will a rise in stocks be warranted? Should we get such a rally, remember the mantra to buy the dips and sell the rallies.

tags: us contagion  oil prices  dollar

Oil prices are rallying this morning, following yesterday’s gains, on concerns that Russia might extend its Georgia military campaign and that tropical storm Fay might still pose a risk to oil production in the Gulf of Mexico.

Crude oil for September delivery is up $3.82, to $119.38. On the other hand, stocks are down at the open, with the Dow Jones Industrial Average now at 11,349.10 losing 78.33 points on continued concerns over Lehman Brothers (LEH) Fannie Mae (FNM) and Freddie Mac (FRE).

The other major indices are down as well, with the Nasdaq down 14.29 and trading at 2374.79
and the S&P 500 down 6.79 and trading at 1267.75.

At 10:35 am today (08/20/08), we will be getting weekly Crude Inventories report from the Energy Department. If we get a reading that shows gasoline stocks dropped more than is being forecasted, a rise in crude oil inventories is expected, we will see a continued rebound in the price of oil, which will send oil related stocks higher.

During regular trading on Tuesday, the price of oil for September delivery gained $1.66 to close at $114.53 a barrel. Crude prices did hit an intraday low of $111.64 a barrel after it was determined that tropical storm Fay won’t have any impact on oil production in the Gulf region. The intraday high was $116.65 a barrel.

We’ve been advocating on this blog for the past couple weeks now, that oil prices can’t keep going down in a straight line and that we were due for a near-term bounce. Of course, after we said that, oil prices decided to test out theory and just about succeeded.

The Crude Inventories will be released at 10:35am. So traders willing to put up some risk capital, have plenty time to place trades ahead of the report. We expect the report to be bullish for oil and as a result, yesterday, we issued an alert to subscribers of our Options Capitalist service, to buy the September 60 calls on Anadarko Petroleum (APC).

The current price is $2.20 on the ask side. This is still a good entry point. If entering the trade, buy at least 6-10 contracts, that’s the minimum, so that you can exit with a profit on even the slightest move in the stock.

Tags: oil prices, crude inventories, anadarko

Oil prices are rallying on the Crude Inventories report from the Energy Department for the week ending 08/09. The report which was just released at 10:35 AM EST, showed that crude inventories dropped by 316,00 barrels. Forecasters were expecting an increase of 300,000 barrels.

Prior to the report’s release, oil prices were in positive territory, but only up about $.50 cents. They have since shot up and are now up $2.16. The Dow Jones Industrial Averages added to their losses on the rising oil prices and are now off about 160 points.

oil prices

In recent years, the dollar has been in a free fall against other major world currencies. Against the Euro, when plotted on a chart, it has trended downward for nine years and since April 2006, it has been in a steep decline. Consequentially, there are those that have been screaming for government policies that would strengthen the dollar while sometimes referring to the dollar as the U.S. Peso.

Well while the dollar is still sitting at multi-year lows, it has staged a very impressive rally in the last three weeks and proponent of a strong U.S. dollar now get to see whether their theories hold true.

Of late, a weak dollar, especially when coupled with the weakening U.S. economy, has been a very good thing. A lot of U.S. multi-national companies that reported good earnings in the most recent reporting period, in a round about way, credited the weak dollar.

They reported that while domestic sales were slumping, exports and overseas sales by their foreign subsidiaries where strong as the weaker dollar made better quality U.S. goods cheaper. Besides helping exporting companies’ bottom line, increased U.S. exports also improves our economy by lowering our ever-growing trade deficit.

The positives of a strong dollar cannot however be overlooked. While technicals and too fast a climb does play a role in the recent weakening in oil prices, the strengthening dollar also plays a major part and this would probably be a point that would be underscored by advocates for a strong dollar.

Then again, lest we forget, there are all sorts of signs that shows that higher oil prices does in fact temper demand for oil derived products such as gasoline, which would cause and does cause the price of oil to fall.

Americans in the past three months, have been buying less and less gasoline, and recent reports out of China shows that imports of oil, dropped by about 7%. Considering that China which has played a part in the increase of oil prices due to their expanding economy and growing need for oil, imported 1.1 billion barrels last year, that is significant enough to have an effect on crude oil pricing.

While oil prices in regular trading today, might end up to the upside, they are currently falling in extended hours trading, on concerns that the U.S. economy is continuing to weaken, another proof that regardless of where the dollar trades, oil prices would at some point, weaken.

dollar oil us economy