Oil prices continue to get pressured as the Greece bailout is still not settled. Hopes that a meeting over the weekend would make the Greek crisis go away were wishful thinking. The bottom whether or not Greece Prime Minister George Papandreou can deliver to the EU, assurances on austerity measures. Of course that may be difficult as his own parliament is threatening to oust him with a no confidence vote. Questions remain on whether or not Greece will get its much needed influx of cash and this is raising default fears once again; not to mention contagion. We see demonstrations in Spain because of dismal economic prospects.
The AFP reports, “Tens of thousands of protesters flooded the streets of Madrid Sunday blaming bankers and politicians for causing a financial crisis that forced the country to adopt painful spending cuts. Demonstrators of all ages linked to a protest movement called the "indignant" assembled early Sunday in several neighborhoods on the outskirts of Madrid. They then formed six columns and converged on the city centre, gathering near Spain's parliament where they met various forms of police resistance, including 12 vans blocking several major roads.
Protests over the economic crisis and soaring unemployment began in Madrid on May 15, and fanned out nationwide as word spread by Twitter and Facebook among demonstrators. On Sunday protesters insisted that workers and the unemployed would not passively accept spending cuts to help ease a crisis they had no role in causing. Then Moody’s as reported by the London Telegraph, “has threatened to cut Italy's credit ratings on concerns over a possible rise in Eurozone interest rates may derail the country's fragile economic recovery, raising more fears of contagion from the Greek debt crisis.”
Yet it is not only Greece, Spain and Italy that is raising fears of weakening oil demand but fears of a tax showdown in India and the Republic of Mauritius. Reuters News reports, “The BSE Sensex fell as much as 3.1 percent on Monday on market talk the government is reviewing a tax treaty with Mauritius, triggering jitters foreign inflows could take a hit. A large proportion of foreign investment in the stock market comes through companies registered in the Indian Ocean island and are exempted from tax in India under a Double Taxation Avoidance Agreement with Mauritius. The two countries are expected to review the treaty soon, a source in the finance ministry said, but declined to elaborate on the time-frame. Following a series of corruption scandals in high places the government has come under intense pressure to plug loopholes from tax havens. Overseas funds hold more than $100 billion of Indian shares, accumulated since India opened the door to foreign institutional investors in 1992, data from the Securities and Exchange Board of India showed."The treaty with Mauritius is being renegotiated. But it is too premature to say all the foreign investments through Mauritius will get hampered," said Siddharth Shah, head of funds practice group, Nishith Desai Associates. Traders said the market talk could not have come at a worse time with shares already reeling under rising interest rates and slowing growth.” Those are the same things that are lowering oil demand expectations. With India and China raising rates and concerns that some of the hot money in India will be cooled off a bit should put further downside pressure on the complex.
They are getting awfully chummy but things are not perfect just yet. Dow Jones News Wires reports that, “Russia hopes to finalize a long-term natural-gas supply deal with China before the end of 2011, Alexander Medvedev, deputy chief executive of state gas producer OAO Gazprom said Monday after the two countries failed to reach a deal Thursday. "I think there is a good chance to reach a deal by the end of this year," Medvedev said. Russia had hoped to sign a deal with the Chinese during talks between Russian Prime Minister Vladimir Putin and Chinese President Hu Jintao in Moscow Thursday, but they couldn't agree on the price.
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.