Energy report: Gulf spill worse than Valdez

Worse than Valdez?

The worst case scenarios continue to become possible as the news from the Gulf of Mexico continues to get worse. Alaska's Interior Secretary Ken Salazar said that the BP spill from the Deepwater Horizon could turn out to be worse than the Mobil Corp. Valdez spill in Alaska. President Obama said that the spill was, “massive and potentially unprecedented environmental disaster” and could take many days to stop. Traders are worried about the potential impact on oil prices. The impact may happen if the spill disrupts imports and at that point the price impact could spread to other commodities. We could see imports of steel, coffee and cotton disrupted.

China is taking steps to slow its economy again. Fearing a burgeoning bubble, China has once again taken steps to try to slow things down a bit. MarketWatch reported that the People's Bank of China announced Sunday it was increasing commercial bank reserves requirement ratio by 0.5% points, taking the RRR of large banks to 17% and that of small and medium sized banks to 15%. The increase, which goes into effect May 10, is the PBOC's third such hike this year and is estimated to drain out about 300 billion yuan ($43.9 billion) in liquidity from the Chinese banking system.

This news, while bearish for oil, is being offset somewhat because of the 147 billion dollar Grecian bailout. Now add in some uncertainty because of the oil spill and the market is a bit flat and confused waiting for more news and direction. We need to keep our eye on the spill and on any reports that shipping is being disrupted.


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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