Solid economic data keeps the oil bulls dreams alive in an impressive drive to end the week. The market is still getting support from the calendar and found comfort in the fact that housing seemed to blow away market expectations. Sales of new homes increased by a stunning 26.9% over February, inspired by federal tax incentives for buyers that are set to expire in days. Still, as exciting as the numbers were by historical standards, they were not anything to write home about nor do they suggest that without government help they can be repeated. Yet it was enough to get the market to forget about Greece and their problems that had been weighing on the market in the morning.
The housing numbers made us forget all about Greece. Though Greece may be getting bailed out, the question remains if you will be next. Bloomberg News reports that Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable, “the budget cuts needed in Europe in many countries are profound.” Bloomberg says that Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default. At 14.3% of gross domestic product, Ireland had the euro region’s largest deficit last year. Greece’s was 13.6%; Spain’s was 11.2% and Portugal’s 9.4%.
Yet despite the problems in Europe the oil market is getting caught up in a seeping wave of increasing economic optimism. Crude oil is getting its drive in part from fears that rates will continue to remain low as demand for the products rise increasing the chances for more commodity price inflation.
The Deepwater Horizon site is said to be leaking about 1000 barrels of oil per day. NOAA says that an attempt to control the leaking well using a Remotely Operated Vehicle (ROV) was not successful, and the well continues to leak. All available assets are being brought on-scene to address well control and cleanup of the floating oil. Over 1000 people are supporting the operational response. Efforts are now focused on gathering more information about the spill (amount, fate and effects), plans for possible undersea containment, drilling relief wells, maximizing oil recovery and readying for shoreline assessments. NOAA says the plan for attacking the spill has elements that try to activate the blow-out preventer (BOP), a cut-off valve at the well-head using ROVs, then if successful use an undersea dome to contain leaking oil. This process could take several months.
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 email@example.com.