Oil watching for demand destruction from Greek debt

Can't get away from Greece

Global oil markets are falling as the Greece problem continues to weigh on market sentiment. Market odds put a Greek default at 98% and rising. The Wall Street Journal reported, "In Greece, the cabinet of Prime Minister George Papandreou met on Sunday to discuss growing concerns over the nation's ability to meet its fiscal targets. The so-called "troika" of international lenders — the International Monetary Fund, the European Central Bank and the European Commission — are withholding the next disbursement of aid to Greece until the government comes up with a credible plan to meet its deficit-reduction commitments."

In a sharply worded statement released after the cabinet meeting Sunday, Finance Minister Evangelos Venizelos said the government takes full responsibility for the implementation of the agreed program, but also warned that Greece shouldn't be the "scapegoat" used by European institutions to hide their inability to manage the Eurozone crisis." So take that and please write me a check! The Greek government knows that it is going to be very messy for the Eurozone if they are allowed to fail so at some point they may just tell Europe to either come up with more cash or face the consequences that will come when Greece goes belly up.

Obviously the oil market believes that demand will fall as well and the market seems to be suggesting further weakness as we move forward. OPEC Secretary-General Abdalla El-Badri added to that mindset when he said global demand for oil is rising less than expected. Bloomberg News Reported that El-Badri said fiscal woes in Europe and high unemployment in the U.S. are curbing global oil-demand growth. Crude supply from the Organization of Petroleum Exporting Countries may be boosted by 500,000 to 600,000 barrels a day from Libya’s eastern and western fields “soon,” he said at a conference in Dubai. Fighting in Libya since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

Natural gas is under big pressure as a big jump in rig counts added to the bearish sentiment. Penn Energy reports, "According to the weekly rig report from Baker Hughes, the number of rotary rigs actively drilling for oil and gas in the United States has increased by 27. With 1,934 rigs currently working onshore the US, the number of rigs has increase by 308 over the year, spurred by increased drilling and development in various shale plays across the nation. An overwhelming majority of the wells currently being drilled are horizontal at 1,137. Currently, there are 1,062 rigs drilling for oil, an increase of 392 over the year. On the other hand, the number of rigs drilling for natural gas has decreased by 70 over the last year, with 912 rigs drilling for natural gas. Texas continues to lead the pack with 895 rigs actively drilling for oil and gas in the state. Supported by activity in the Haynesville Shale, Barnett Shale, Eagle Ford Shale and Permian Basin, Texas has added 165 rigs over the last year. Although dropping four rigs this week, the number of rigs working in Oklahoma has increased by 67 over the year."

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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