Friday saw fears that Spain could not borrow enough money to meet its needs. Now it's a replay in Greece and fears that they may once again be on the verge of default. Greece is in a "Great Depression" according to Prime Minister Antonis Samaras, as bad as the one in the 1930s and once again Greece becomes ground zero in the European crisis. Fears that Greece will not live up to its bailout agreement is raising concerns as other countries in the Eurozone look set to falter. The Spanish 10-year yields hit a Eurozone record high as Spain’s regions look to the government for a bail-out and the contraction is putting deflationary pressure on oil futures.
Even in China stocks fell to the lowest level since 2009 as signs that oil demand is faltering. Last week Dow Jones reported that China's commercial crude-oil stocks in June grew at their highest monthly rate this year because of a significant decline in crude throughput at major refineries, leading to a drop in oil-product stocks. That in part is because Europe is in a shambles and hurting Chinese exports.
RTT News reported that China’s State owned oil company CNOOC Ltd. and Canadian Nexen Inc. reached a definitive agreement, pursuant to which CNOOC Limited would acquire Nexen for $27.50 per share in cash. The purchase price represents a premium of 61% to the closing price of Nexen's common shares on the NYSE on July 20, 2012, and a premium of 66% to Nexen's 20 trading-day volume-weighted average share prices. A total of about $15.1 billion would be paid for Nexen's common and preferred shares, and Nexen's current debt of some $4.3 billion would remain outstanding. Also, CNOOC added that Nexen would complement its large offshore production footprint in China and extends its global presence with a high-quality asset base in many significant producing regions including Western Canada, the U.K. North Sea, the Gulf of Mexico and offshore Nigeria. Further, Nexen management's current mandate would be expanded to include all of CNOOC Limited's North American and Caribbean assets. The transaction, which may close in the fourth quarter of 2012, would be completed by way of a plan of arrangement. The transaction would be funded by CNOOC Limited's existing cash resources and external financing.
Oil supply in the US should rise after another surprise draw. Look for oil to increase by 2 million barrels, gas to fall by 1.5, distillate down by 2.0 and runs down 0.5.