Federal Judge Martin L.C. Feldman issued an injunction against the Obama administration lifting its drilling moratorium saying the government never justified the ban and appeared to mislead the public. Oil prices fell back across the curve falling 15-30¢ a barrel right after the announcement. Judge Martin L.C. Feldman as reported by the Washington Times issued an injunction, saying that the moratorium on drilling will hurt drilling-rig operators and suppliers and that the government has not proved an outright ban is needed, rather than a more limited moratorium. He also said the Interior Department also misstated the opinion of the experts it consulted.
The truth is that those experts from the National Academy of Engineering said they don't support the blanket ban. "Much to the government's discomfort and this Court's uneasiness, the summary also states, 'the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.' As the plaintiffs, and the experts themselves, pointedly observe, this statement was misleading," Judge Feldman said in his 22-page ruling.
The market did not break more because the Obama administration is going to appeal the ruling and the market knows that they will not give up easy especially when their political backside is on the line.
The AP is reporting that Interior Secretary Ken Salazar will issue a new order imposing a moratorium on deepwater drilling. Salazar said that the new order will contain additional information making clear why the six-month drilling pause was necessary in the wake of the Gulf oil spill. Salazar says he will point to indications of inadequate safety precautions by industry on deepwater wells. He said he would issue a new order in the coming days showing that a moratorium is needed." But first he has to find a new set of experts.
Good thing it is not winter because if it were, then we may have seen oil flying high on the latest gas dispute between Russia and Belarus. Bloomberg News reported, "Belarus President Aleksandr Lukashenko threatened to halt gas transit to Europe and accused OAO Gazprom of starting a "gas war," after the Russian export monopoly for the fuel cut supplies to the country by 30%. Lukashenko demanded Gazprom pay more about $260 million in transit fees during a meeting with Russian Foreign Minister Sergei Lavrov today shown on Belarus state television. Gazprom is demanding $192 million from Belarus for past deliveries, lowering supplies today from a 15% cut yesterday. Russia, which supplies a quarter of Europe's gas via Belarus and Ukraine, threatened to cut supplies to Belarus in January 2007, averted by a last-minute accord that more than doubled its neighbor's gas price. Gazprom also halted flows to Ukraine, disrupting deliveries to Europe during freezing weather in 2006 and 2009 and raising concerns it was using energy as a tool against Ukraine's then pro-European government." In the past these disputes drove oil substantially higher, yet because it is summer and there is an excess supply of oil in the world the treat only gave oil a momentary boost.
The market's focus today will be the Fed and the Energy Information Agency weekly supply report. Last night the American Petroleum Institute gave us a bearish report by reporting an increase of crude stocks to the tune of 3.7 million barrels. The API also showed that distillate stocks increased by 1.1 million barrels and gas sticks up by 1.3 million barrels. On the demand side the MasterCard Spending Pulse report showed that gasoline demand rose for a second consecutive week as prices at the pump remained at a 14 week low. Bloomberg says that motorists bought an average 9.311 million barrels of fuel a day in the week ended June 18, the second-biggest payments network company said today in its SpendingPulse report. The average pump price for regular gasoline was unchanged at $2.70 a gallon, the lowest since March 5. Demand is increasing as the July 4 holiday, traditionally a peak demand period of the summer driving season, nears. The 0.4% gain last week, however, was less than the 1.4% increase the prior week. The energy complex is still following the stocks. The Fed is not expected to do much of anything so oil should still stay in this recent trading range. One thing that could knock us out of that range would be a hurricane. Today's tropical wave watch show that the likelihood that the recent storm in the Atlantic will become a cyclone has fallen to 20%. It looks like we dodged another bullet but the Atlantic weather watch will go on.
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 firstname.lastname@example.org