A better than expected Jobs report and Israel attacking Syria's military and weapons instillation has shocked oil out of it recent bearishness. Forget the fact that demand is lousy and supplies at historic highs, it does not matter when Mid-East tensions and economic anticipation overshadows supply and demand. Oil is on a tear and is bringing the products along with it.
Oil got a boost as the world's largest oil consumer seems to have the only economy in the world that seems to be working, or at least not tanking. The U. S. Bureau of Labor showed that employment increased up more than expected in April dropping the jobless rate to 7.5% a four-year low. Non-Farm Payrolls expanded by 165,000 and on top of that we saw an upward revision of a 138,000 jobs increase in March. Oil seemed to believe that this jobs report would somehow reignite energy demand.
Syria is calling it an "act of war.” Over the weekend
Israeli jets pounded Syrian military sites in a pair of bombings. Syria says this opens the door to all possibilities. Fears that the Syrian civil war could spread is putting the risk trade back in oil.
Natural gas once again has acted inversely to oil. Oh sure, we had the bearish report and the calendar is working against it, but at the same time oil is soaring in relation to natural gas once again. Remember that we are going to follow natural gas and observe whether or not it acts as a hedge against oil in the risk-on and risk-off sense. Is natural gas a new safe haven commodity and does it act as a hedge against oil when oil makes a sharp move in one direction or another.
Natural gas did get some supportive news in that the Baker Highs rig count said that natural gas producing rigs hit an 18-year low. Reuters News reports that the number of rigs drilling for gas in North America fell by 12 to 354 in the week to May 03, while oil-directed drilling rigs rose by 22 to 1,403, data from oil services firm Baker Hughes showed on Friday.
One of the big questions for the natural gas market is whether or not the U.S. is going to be a natural gas exporter. Reuters news reports that "President Barack Obama said in Central America on Saturday that the United States might be able to help relieve that region's growing energy demands by exporting liquefied natural gas, a move opposed by some U.S. businesses and environmentalists.
At a development forum that ended his three-day trip to Mexico and Costa Rica, Obama held out the prospect that surging supplies of natural gas in the United States could be sold in the area to help reduce its energy costs.
Obama's Energy Department is to decide in the coming months, possibly this summer, whether to approve more than two dozen applications for natural gas exports to companies in countries that do not currently have a free-trade agreement with the United States. It is one of the first big energy decisions he faces early in his second term. Obama made a case for taking the step. The United States, riding a surge of natural gas production, is likely to be a net natural gas exporter as soon as 2020, he said.
He said he discussed with Central American presidents at a dinner on Friday night how U.S. natural gas can be used by the region as a bridging mechanism to relieve its energy demands until alternative energy sources can be increased. "I've got to make an executive decision broadly about whether or not we export liquefied natural gas at all," Obama said. Helping Central America would be a factor in the decision-making, he added.
U.S. companies that produce the gas feel the supply is more than adequate, but some U.S. businesses oppose large-scale liquefied natural gas exports out of concerns it will dramatically increase the price of the energy in the United States. Environmentalists have raised concerns as well about the impact of increased production on the U.S. environment.”
So the President may use the excuse of helping the poor as a reason to export natural gas. Works for me. Of course long term we still believe in the natural gas story. Not only will it help the poor, it will reduce greenhouse gasses.