Crude's super slide

image credit: Louisiana GOHSEP

Crude oil (NYMEX:CLN14) is having a slide of historic proportions as gasoline and oil production surge and demand prospects start to wane. Brent (NYMEX:SCN14) crude fell for 9 straight days the biggest losing streak run since 2010 and West Texas Intermediate is on its longest losing streak since 1984.

Not only was gasoline (NYMEX:RBN14) demand over the 4th of July holiday disappointing to say the least, weak industrial production number across the Euro-zone is providing a murky demand outlook for the rest of the globe. Now add to that the fact that the market now believe that Iraq's oil exports will not be impacted by the ISIS assault and the resumption supposedly of massive Libyan exports and record production and U.S. Exports.

The Energy Information Administration is showed dismal gasoline demand over the weekend as the four week moving average fell 0.4 percent below year ago levels. The Market was hoping for demand to blow away last year's numbers but high prices and Hurricane Arthur blew those hopes away.

Yet gasoline production soared as well as exports as evidenced by activity in the Gulf Coast. Over all refiners ran 16.3 million barrels a day of crude last week, the most since July 2005. Refinery runs hit 91.6 percent up from 91.4 percent the previous week. The Gulf Coast refined 8.65 million barrels a day driving down Gulf Coast Oil Inventories by a whopping 4.21 million barrels last week. 

What we are seeing here is a major step in the United States becoming a major product exports. The fine line between what is considered crude and what is being called product is driving these record exports. Yet oil demand is suspect as Reuter reports that French industrial production plunged unexpectedly in May and inflation fell to its lowest level since the financial crisis in 2009 in fresh signs recovery is proving elusive for the euro zone's second-biggest economy.

The INSEE national statistics agency reported that industrial production plunged 1.7 percent in May from April, missing by a long-shot economists' expectations on average for an increase of 0.2 percent. The slump adds to growing signs of weakness in core euro zone countries after Germany saw new industrial orders fall and trade fell short of expectations.

OPEC though is looking to the US to drive demand growth for oil. OPEC is raising their forecast for oil demand by 1.13 million barrels led by the US. Gold and silver continue to be strong.

Gold (COMEX:GCN14) hit a 3-and-a-half month high inspired by the Fed minutes and a weak dollar. With the Fed seemingly unnerved by the weak GDP and stock market complacency it might make it harder for them to raise rates. On top of that India's new government s its record high import duty on gold it fiscal budget to be presented later in the day. Reuters reports that the new government led by Narendra Modi had indicated earlier that they would ease the restrictions, with expectations mounting that an announcement could come on Thursday when the government presents its first fiscal budget. 

India is likely to cut its gold import duty to 6 percent in Thursday's budget, leading to a rise in imports in the second half, a senior official at the country's biggest gold trade group said. Indian gold imports slid by a fifth last year, so any jump in imports from the country would likely underpin gold prices. Reuters also reported that  among other precious metals, platinum and palladium continued to gain amid fears over supply issues from major producer South Africa. Palladium rose for a 14th straight session to trade near its highest since February 2001 

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.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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