Energy report: Earnings support crude bulls

How much oil does it take to run a computer? Strong earnings from Intel are helping drive oil higher overnight. No it really is. And I can't figure out where to put the oil in my computer. Strong tech earnings making the economy feel good about itself again is putting the oil back on the bull market track and raising the questions whether or not the world can afford $95 oil? Well the answer may be the same as how many licks it takes to get to the center of a Tootsie Pop? The world may never know. Still you have to give the bulls a lot of credit as they still own this market because after a few choice words from Treasury Secretary Tim Geithner the oil market began to dig itself out of a pretty deep hole. The oil previously had started to wobble on poor earnings from Alcoa and an ominous warning from the International Energy Agency about the impact of high prices of oil on the U.S. and other industrialized countries. Yet Tim Geithner again saying that the steps they took to fix the economy is working reiterating some of his thoughts in a Washington Post op-ed piece where Mr. Geithner says that "America is close to turning the page on this economic crisis." But whatever the case, at least today economic optimism and strong earnings from Intel had more influence on oil then the numbers from that pesky supply and demand stuff provided by the American Petroleum Institute.


The API reported builds across the board as I predicted with crude increasing by 1.4 million barrels. Distillate stocks increased as well rising a very strong 1.7 million barrels. Gas supplies surged as well to the tune of 1.6 million barrels in part because higher prices might be choking off demand. Barbara Powell at Bloomberg News reported that U.S. gasoline demand slipped last week to an eight-week low as motorists reduced their driving after the three-day Easter weekend according to a report from MasterCard SpendingPulse.

According to the report motorists bought an average 9.3 million barrels of gasoline a day in the week ended April 9, 3.6% below the prior week, the second-biggest credit-card company said in its SpendingPulse report. That's the lowest level of demand since Feb. 12 and the largest week-over-week drop in nine weeks. The decline follows a 1.2% increase the prior week. Oh yes there was the holiday that may have played into it yet I think we are seeing some consumer resistance to higher pump prices.


Have you been waiting around for some currency in Asia to become a bit more flexible? Well you are going to get some more flexibility but not from China. Well not yet anyway. The Financial Times reported that Singapore on Wednesday announced sharply improved economic growth for the first quarter and revalued its currency to head off fears of a spike in inflation. Economists said the moves might signal that growth across the region has been stronger than expected .The trade and industry ministry raised its forecast for this year's growth to a range of 7% to 9% from 4.5% to 6.5%, and said the rate of inflation was likely to rise this year to between 2.5% and 3.5%. Its previous forecast for inflation was 2% to 3%.


Of Course despite the fact that China seemed reluctant to bow to outside pressure on its currency exchange rate it seems that Treasury Secretary Tim Geithner is appealing to China's growing pride. Mr. Geithner feeding the growing egos of the Chinese said that, "As a strong, large, independent, growing economy, it doesn't make sense for that country to run a monetary policy exchange-rate regime that effectively lets the Federal Reserve set interest rates for their economy, that's why I'm confident that they're going to move."


Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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