Fiscal cliff tensions, a rise in API inventories and weakening economic growth forecasts are weighing on petroleum this morning. Traders are rolling the day product expiration and may not get long as it looks like politicians are destined to sink the economy over political ideology.
Harry Reid declared he is disappointed with the progress of the negotiations and says the Republicans are talking happy talk about revenues, but, "we only have a couple weeks to get something done.” So we have to get away from the happy talk and start talking about specific things.”
Of course it was happy talk that made oil fall and the dollar rally before Harry Reid derided happy talk. Consumer confidence in the U.S. hit a four-year high as shoppers rush home with their presents. Whatever those consumers are taking, I want some of that.
This comes as the global economic outlook looks a bit darker as the Organization for Economic Cooperation and Development cut its growth outlook for the U.S. and the 17 countries that use the euro currency. The OECD, as reported by the AP, said the combined economy of the 17 euro countries will contract by 0.4 percent this year, worse than May’s 0.1 percent forecast. For 2013, it will contract a further 0.1 percent. The OECD also downgraded its forecasts for the U.S. economy. Even if the White House and Congress strike a budget deal before Jan. 1 and avoid the so-called fiscal cliff of automatic tax hikes and spending cuts, the OECD said the U.S. will grow by only 2 percent next year, down from May’s forecast of 2.6 percent. Traders said weak economic growth would likely hurt demand for energy.
The American Petroleum Institute reported, as I expected, a rebound in petroleum supply. The API reported Weekly Crude Stocks up 2.0 Million barrels, gas stocks up 2.3 million barrels, distillate stocks up 268,000 barrels. Cushing stocks were up 707,000 barrels.
This is the season of giving! Dow Jones reports that Iraq has donated some 100,000 barrels of crude oil to neighboring Jordan to help offset its economic hardship, an Iraqi government spokesman said Tuesday. "The Iraqi cabinet decided to grant Jordan 100,000 barrels of crude oil as a gift to the brotherly Jordanian people," Ali al-Dabbagh said in a statement emailed to Dow Jones Newswires following a regular weekly meeting of the cabinet. Jordan imports some 10,000 barrels a day of crude oil from Iraq at preferential price of $18 dollar below dated Brent. Iraq has recently agreed to increase the amount to 15,000 barrels a day.
Jordan, home to about 6 million people, currently imports some 96% of its energy needs and consumes a little over 100,000 barrels a day. Jordan's crude oil and gas imports cost $5.6 billion in 2011. This year's bill is expected to go beyond that as oil prices are rising according to officials of the ministry of energy and mineral resources.