July 11, 2005
Stories and Comment:
Gas prices surged nearly a dime over the past two weeks to an all-time high of $2.31 per gallon of self-serve regular. That beats the previous record, set April 8, by about 2 cents, said the Lundberg Survey. "Crude oil prices have been working their way through to the pump, and gasoline demand growth in June -- over June 2004 -- fueled the price hikes," Lundberg said about the survey, which was taken July 8 and June 24. Despite the higher prices, gasoline demand was 2.5 percent higher in June than it was a year ago, she said, citing the strong U.S. economy. Other factors affecting the price trend include this year's more stringent limits on sulfur and the higher cost of methyl tertiary-butyl ether, a gasoline additive commonly required in the country's smoggiest cities. Lundberg predicted that continuing strong demand would likely result in slightly higher prices at the pump over the near term, assuming crude prices remain around $60 to $61 per barrel. "Or it could be a lot more, if Hurricane Dennis has his way or wreaks substantial damage to production, transportation and storage facilities" in the Gulf, she said. The all-time peak adjusted for inflation occurred in March 1981, when prices were about 70 cents-per-gallon higher, Lundberg said.
China's trade surplus for June swelled five-fold from a year earlier as exports grew much faster than imports, offering more ammunition for foreign critics who argue that Beijing should let the yuan rise in value. The June surplus grew to $9.7 billion, exceeding forecasts of $8 billion and towering above the $1.8 billion surplus recorded for June 2004. The very large trade surplus will give the U.S. and Europe more excuse to put pressure on China to revalue the yuan. China needs to import more goods and services to avoid a trade war, but it will be very difficult to import more if it doesn't want to change its macroeconomic policy. China is already embroiled in trade rows with the United States over textiles and with the European Union over shoes and frozen strawberries. Annual trade talks between senior U.S. and Chinese officials in Beijing on Monday were expected to focus on their dispute over Chinese textile exports, which have surged following the collapse of global quotas, and market access. Chinese exports remained buoyant in June, rising 30.6 percent on the year, while imports growth grew just 15.1 percent, which was also far slower than the growth seen for much of last year, according to Customs data. Slower import growth seen in recent months has been spurred by government efforts to cool heated sectors of the economy since mid-2003 in a bid to rebalance growth away from heady investment. The accumulated surplus for the first half of the year was $39.65 billion, contrasting with the year-earlier deficit of $6.8 billion. China could post a record trade surplus of more than $70 billion this year, versus $32 billion in 2004.
The dollar fell from a recent 14-month high versus the euro and 19-month highs versus sterling after weak U.S. jobs data on Friday hurt the dollar's rally and investors waited for U.S. trade data later this week. The euro gained some ground after Luxembourg approved the European Union constitution by a solid majority in a referendum over the weekend, while sterling benefited as the market saw a limited economic impact from last week's bombings in London. U.S. employers added just 146,000 new jobs in June, fewer than expected, although the increase was seen enough to let the Federal Reserve extend its yearlong credit tightening campaign. There is still a bit of a hangover from the jobs data. And the market is switching its focus from growth to economic imbalances. U.S. trade figures on Wednesday are expected to show the near-record deficit widening again in May, which should bring investors' attention to the structural imbalances in the world's largest economy. Luxembourg approved the EU constitution with the "yes" vote at 56.5 percent on Sunday, averting the threat of Prime Minister Jean-Claude Juncker's resignation. (The Luxembourg approval) is a small positive for the euro in a sense that politically things are not deteriorating further. But the market thinks the constitution is dead and the worst political news is already in the price.
The charter's future was still in doubt after rejections in France and the Netherlands over the past two months, which raised concerns about the future of political and monetary integration in Europe, shaving around 5 U.S. cents off the euro. We've had the Luxembourg vote over the weekend and it was a 'yes' vote by a wider majority and that's helped the euro against the dollar and also against sterling. The market is massively net short of euros so there might be a pause but it's hard to make a bullish case for the euro through the week. Moreover, expectations for steady to lower interest rates in Europe have also weighed on the euro. The European Central Bank has kept interest rates at 2 percent for the past 2 years although speculation of a cut is mounting. The Bank of England has moved closer to cutting rates. The Federal Reserve has steadily lifted its funds rate to 3.25 percent and is expected to tighten further toward the end of the year. The dollar bought 111.90 yen, down about 0.3 percent from the level in late U.S. trade, as the Japanese currency was helped by higher Tokyo stock prices and Japanese exporters' selling of the dollar to convert overseas profits to yen. After the jobs report, the dollar hit a 14-month high of 112.60 yen.
Oil prices fell over $1 as worries about damage to U.S. oil and gas facilities eased following the passage of Hurricane Dennis. U.S. crude for August delivery (CLc1) dropped $1.13 to $58.50 a barrel, extending losses of $1.10 on Friday and down from last week's record $62.10. People perceived that the hurricane might not be as damaging as Hurricane Ivan. That's why people are taking profits, but the true extent of the damage is not known yet. Hurricane Dennis raced ashore on the U.S. Gulf Coast on Sunday, leaving production companies to start restoring the 42 percent of Gulf oil supply and 27 percent of natural gas output that was shut as a precaution. Several producers said they expected to resume operations today. Traders said crude speculators on the New York Mercantile Exchange, who increased their net buying positions in the week ended July 5 to 32,758, were offloading positions, hitting prices. I think the market cannot sustain prices above $60 without a serious supply disruption such as a hurricane or a refinery outage. As the market tries to rise above $60, there will be profit taking which we have seen periodically. World demand has been remarkably resilient to high prices in recent years but now evidence seems to be building that Chinese demand growth is lending less support to oil markets. The world's second biggest energy consumer after the United States and one of the main drivers of last year's oil price rally, is seeing a sustained slowdown in oil demand growth. Crude imports into China dipped to 2.7 million barrels per day in June from 2.74 million bpd last year as flagging demand and retail price caps prompted refiners to cut processing rates and draw from domestic stockpiles. China's apparent oil demand had contracted over 4 percent in May from a year earlier as refiners rushed to export oil products, while Sinopec, the country's top refiner, has also been reselling millions of barrels of foreign crude.
Hurricane Dennis is likely to cause between $1 billion and $2.5 billion in insured losses, according to an estimate from a firm that serves the insurance industry. That loss estimate from catastrophe modeling firm AIR Worldwide, would make the season's first hurricane less costly than any of the four storms that hit the Southeast United States in 2004. The storm came ashore southeast of Pensacola, Fla., Sunday afternoon as category 3 storms. That nearly followed the path of Hurricane Ivan, one of the 2004 storms. But AIR said there are four important differences between Dennis and Ivan -- intensity, size, speed and location -- that made Dennis less destructive. "While Dennis and Ivan were both category 3 hurricanes, Ivan had sustained wind speeds of 130 mph versus 120 mph for Dennis," according to a statement from AIR. "Hurricane Dennis was also a more compact storm. Ivan's peak winds extended about 25 miles from the center, while Dennis's peak winds extended only about 10 miles from the center, resulting in a much narrower swath of damage." Hurricane Ivan, which hit September 16, 2004, caused insurance payments of an estimated $6 billion, according to ISO's Property Claim Services (PCS), which tracks actual claims information rather than estimating damages from storm models, as AIR does.
Support and Resistance:
S&P`s: Day-Trade (Sept.)
Support starts out at 1213.50, 1207.00 with major at 1201.90.
Resistance comes in at 1221.00, 1224.30 with major at 1231.10.
Bonds: (Sept.)
Support starts out at 116-30 with major at 116-09.
Resistance comes in at 117-16 with major at 118-00.
NASDAQ: (Sept.)
Support starts out at 1535.00, 1523.00 with major at 1510.00.
Resistance comes in at 1547.00, 1558.00 with major at 1565.00.
Dow Jones: (Sept.)
Support starts out at 10,480 with major at 10,429.
Resistance comes in at 10,511 with major at 10,543.
Good Luck!
Commando Trader
www.commandotrader.com
Stories and Comment:
Gas prices surged nearly a dime over the past two weeks to an all-time high of $2.31 per gallon of self-serve regular. That beats the previous record, set April 8, by about 2 cents, said the Lundberg Survey. "Crude oil prices have been working their way through to the pump, and gasoline demand growth in June -- over June 2004 -- fueled the price hikes," Lundberg said about the survey, which was taken July 8 and June 24. Despite the higher prices, gasoline demand was 2.5 percent higher in June than it was a year ago, she said, citing the strong U.S. economy. Other factors affecting the price trend include this year's more stringent limits on sulfur and the higher cost of methyl tertiary-butyl ether, a gasoline additive commonly required in the country's smoggiest cities. Lundberg predicted that continuing strong demand would likely result in slightly higher prices at the pump over the near term, assuming crude prices remain around $60 to $61 per barrel. "Or it could be a lot more, if Hurricane Dennis has his way or wreaks substantial damage to production, transportation and storage facilities" in the Gulf, she said. The all-time peak adjusted for inflation occurred in March 1981, when prices were about 70 cents-per-gallon higher, Lundberg said.
China's trade surplus for June swelled five-fold from a year earlier as exports grew much faster than imports, offering more ammunition for foreign critics who argue that Beijing should let the yuan rise in value. The June surplus grew to $9.7 billion, exceeding forecasts of $8 billion and towering above the $1.8 billion surplus recorded for June 2004. The very large trade surplus will give the U.S. and Europe more excuse to put pressure on China to revalue the yuan. China needs to import more goods and services to avoid a trade war, but it will be very difficult to import more if it doesn't want to change its macroeconomic policy. China is already embroiled in trade rows with the United States over textiles and with the European Union over shoes and frozen strawberries. Annual trade talks between senior U.S. and Chinese officials in Beijing on Monday were expected to focus on their dispute over Chinese textile exports, which have surged following the collapse of global quotas, and market access. Chinese exports remained buoyant in June, rising 30.6 percent on the year, while imports growth grew just 15.1 percent, which was also far slower than the growth seen for much of last year, according to Customs data. Slower import growth seen in recent months has been spurred by government efforts to cool heated sectors of the economy since mid-2003 in a bid to rebalance growth away from heady investment. The accumulated surplus for the first half of the year was $39.65 billion, contrasting with the year-earlier deficit of $6.8 billion. China could post a record trade surplus of more than $70 billion this year, versus $32 billion in 2004.
The dollar fell from a recent 14-month high versus the euro and 19-month highs versus sterling after weak U.S. jobs data on Friday hurt the dollar's rally and investors waited for U.S. trade data later this week. The euro gained some ground after Luxembourg approved the European Union constitution by a solid majority in a referendum over the weekend, while sterling benefited as the market saw a limited economic impact from last week's bombings in London. U.S. employers added just 146,000 new jobs in June, fewer than expected, although the increase was seen enough to let the Federal Reserve extend its yearlong credit tightening campaign. There is still a bit of a hangover from the jobs data. And the market is switching its focus from growth to economic imbalances. U.S. trade figures on Wednesday are expected to show the near-record deficit widening again in May, which should bring investors' attention to the structural imbalances in the world's largest economy. Luxembourg approved the EU constitution with the "yes" vote at 56.5 percent on Sunday, averting the threat of Prime Minister Jean-Claude Juncker's resignation. (The Luxembourg approval) is a small positive for the euro in a sense that politically things are not deteriorating further. But the market thinks the constitution is dead and the worst political news is already in the price.
The charter's future was still in doubt after rejections in France and the Netherlands over the past two months, which raised concerns about the future of political and monetary integration in Europe, shaving around 5 U.S. cents off the euro. We've had the Luxembourg vote over the weekend and it was a 'yes' vote by a wider majority and that's helped the euro against the dollar and also against sterling. The market is massively net short of euros so there might be a pause but it's hard to make a bullish case for the euro through the week. Moreover, expectations for steady to lower interest rates in Europe have also weighed on the euro. The European Central Bank has kept interest rates at 2 percent for the past 2 years although speculation of a cut is mounting. The Bank of England has moved closer to cutting rates. The Federal Reserve has steadily lifted its funds rate to 3.25 percent and is expected to tighten further toward the end of the year. The dollar bought 111.90 yen, down about 0.3 percent from the level in late U.S. trade, as the Japanese currency was helped by higher Tokyo stock prices and Japanese exporters' selling of the dollar to convert overseas profits to yen. After the jobs report, the dollar hit a 14-month high of 112.60 yen.
Oil prices fell over $1 as worries about damage to U.S. oil and gas facilities eased following the passage of Hurricane Dennis. U.S. crude for August delivery (CLc1) dropped $1.13 to $58.50 a barrel, extending losses of $1.10 on Friday and down from last week's record $62.10. People perceived that the hurricane might not be as damaging as Hurricane Ivan. That's why people are taking profits, but the true extent of the damage is not known yet. Hurricane Dennis raced ashore on the U.S. Gulf Coast on Sunday, leaving production companies to start restoring the 42 percent of Gulf oil supply and 27 percent of natural gas output that was shut as a precaution. Several producers said they expected to resume operations today. Traders said crude speculators on the New York Mercantile Exchange, who increased their net buying positions in the week ended July 5 to 32,758, were offloading positions, hitting prices. I think the market cannot sustain prices above $60 without a serious supply disruption such as a hurricane or a refinery outage. As the market tries to rise above $60, there will be profit taking which we have seen periodically. World demand has been remarkably resilient to high prices in recent years but now evidence seems to be building that Chinese demand growth is lending less support to oil markets. The world's second biggest energy consumer after the United States and one of the main drivers of last year's oil price rally, is seeing a sustained slowdown in oil demand growth. Crude imports into China dipped to 2.7 million barrels per day in June from 2.74 million bpd last year as flagging demand and retail price caps prompted refiners to cut processing rates and draw from domestic stockpiles. China's apparent oil demand had contracted over 4 percent in May from a year earlier as refiners rushed to export oil products, while Sinopec, the country's top refiner, has also been reselling millions of barrels of foreign crude.
Hurricane Dennis is likely to cause between $1 billion and $2.5 billion in insured losses, according to an estimate from a firm that serves the insurance industry. That loss estimate from catastrophe modeling firm AIR Worldwide, would make the season's first hurricane less costly than any of the four storms that hit the Southeast United States in 2004. The storm came ashore southeast of Pensacola, Fla., Sunday afternoon as category 3 storms. That nearly followed the path of Hurricane Ivan, one of the 2004 storms. But AIR said there are four important differences between Dennis and Ivan -- intensity, size, speed and location -- that made Dennis less destructive. "While Dennis and Ivan were both category 3 hurricanes, Ivan had sustained wind speeds of 130 mph versus 120 mph for Dennis," according to a statement from AIR. "Hurricane Dennis was also a more compact storm. Ivan's peak winds extended about 25 miles from the center, while Dennis's peak winds extended only about 10 miles from the center, resulting in a much narrower swath of damage." Hurricane Ivan, which hit September 16, 2004, caused insurance payments of an estimated $6 billion, according to ISO's Property Claim Services (PCS), which tracks actual claims information rather than estimating damages from storm models, as AIR does.
Support and Resistance:
S&P`s: Day-Trade (Sept.)
Support starts out at 1213.50, 1207.00 with major at 1201.90.
Resistance comes in at 1221.00, 1224.30 with major at 1231.10.
Bonds: (Sept.)
Support starts out at 116-30 with major at 116-09.
Resistance comes in at 117-16 with major at 118-00.
NASDAQ: (Sept.)
Support starts out at 1535.00, 1523.00 with major at 1510.00.
Resistance comes in at 1547.00, 1558.00 with major at 1565.00.
Dow Jones: (Sept.)
Support starts out at 10,480 with major at 10,429.
Resistance comes in at 10,511 with major at 10,543.
Good Luck!
Commando Trader
www.commandotrader.com
