When Irish eyes are crying.
A downgrade of Irish debt, an oil spill in China and two storm systems down in the Atlantic that bear watching has oil being pulled in different directions. The tug and pull between bearish and bullish forces has oil bouncing in both directions. Now with a whole plate of earnings ahead of us, the dollar and the stock market will be our guide unless of course things get nasty weather wise down south.
Overnight Moody's Investors Service cut Ireland's sovereign debt rating to Aa2 from Aa1 because of what they say is the government's "gradual but significant loss of financial strength." Moody says that Ireland’s weakening debt affordability, lower economic growth prospects due to the severe downturn in the banking and real estate sectors, as well as liabilities from the bailout of the banking sector all contributed to the downgrade. At first oil broke on this news as it was feared that this downgrade might hit Europe and what is perceived as Eurozone stability. Yet oil came back as Moody's at the same time lifted the ratings outlook on Irish government debt to stable from negative and said that the risks are now evenly balanced at the new lower rating standard. Besides we all knew that Ireland was in danger of a downgrade in the first place.
Don’t cry over spilled milk but I guess you can cry over spilled oil. The latest oil spill is in China. Dow Jones reports that the Dalian Port Company has closed the port for clean-up operations after an oil pipeline explosion at its Xingang berths Friday caused what could be the largest oil spill in Chinese waters, an individual in the shipping industry said. The clean-up could take eight to 10 days, the Beijing-based individual told Dow Jones Newswires. However, a shipping agent in Singapore heard that the port could be re-opened in four to five days. "It could worsen port congestion and bring shipping rates up again," the person in Beijing said. In the meantime, port authorities are likely to divert seaborne carriers with cargoes of commodities including oil, iron ore and grains, to neighboring northern ports like Caofeidian and Qinhuangdao, he said.
Two storms brewing in the Atlantic will keep the market watching the weather. Two tropical waves, both with about a 20% chance of becoming a hurricane, may keep some of the aggressive bears at bay.
Climate at a price Bloomberg News reports that “Proposed Senate legislation to limit greenhouse gases from power plants, refineries and factories would cut U.S. gross domestic product by $452 billion, or 0.2%, between 2013 and 2035, the Energy Information Agency. A cap-and-trade program for greenhouse gases, “increases the cost of using energy, which cuts real economic output, reduces purchasing power, and lowers aggregate demand for goods and services,” the agency said in a report on legislation released May 12 by Senators John Kerry and Joseph Lieberman. The legislation, which aims to cut the greenhouse gases scientists have linked to global warming 17% from the 2005 level by 2020, would cost the average household $206 a year, the EIA said in the report. Kerry, a Massachusetts Democrat, and Lieberman, a Connecticut Independent, are working on a scaled-back proposal that targets pollution from power plants. Senate Majority Leader Harry Reid, a Nevada Democrat, has said he wants to include a carbon-cutting program for power plants in energy legislation to be debated the week of July 26. Under cap-and-trade, the government issues a declining number of carbon dioxide allowances which companies can buy and sell. Allowances carrying the right to release one metric ton of carbon dioxide into the atmosphere would cost $32 each by 2020 under Kerry and Lieberman’s May proposal, called the American Power Act, the EIA said. Hang onto your wallets.
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