Not Very Demanding
Crude oil (NYMEX:CLU14) prices are taking a hit as demand worries are starting to take its toll on the energy complex.
Not only did we see weak demand in yesterday's Energy Information Administration weekly report economic slowdown fears are taking hold. The U.S. GDP was not all it was cracked up to be. Even after beating the street with 4 percent growth number high inventories in the report is leading to speculation that we will see downward revisions in the future. On top of that EU and U.S. sanctions on Russia are now being viewed by the market as being a bigger risk to demand for oil than supply.
The Fed then weighed in with new language that caused yields and the dollar to surge further eroding oil and product demand expectations. If that was not enough we have a default in Argentina and a major stock price drop in Portugal's Banco Espirito Santo SA's stock after it was ordered to raise capital following a 3.6 billion-euro ($4.8 billion) first-half net loss.
U.S. oil and product exports surge but domestic demand is weaker than expected. Oil exports hit a 15-year high out of the U.S. as shale oil exports are officially moving and the line between what constitutes oil and what constitutes products continues to blur. Crude inventories fell 3.7 million barrels in the last week, compared with analysts' expectations for a decrease of 1.5 million barrels. Gasoline stocks rose 365,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel gain and a 1 percent fall in demand from a year ago. Tet even with the weak demand Crude stocks at the Cushing, Okla., delivery hub fell 924,000 barrels to 17.9 million barrels, giving WTI a lift over Brent.
Natural gas (NYMEX:NG14) will have one eye on the EIA report and one on the Atlantic. The National Hurricane Center says that satellite data indicate that shower activity has increased a little in association with a well-defined low pressure system located about 850 miles east of the southern Windward Islands. In addition, winds to near tropical storm force are occurring over a small area just north of the center. While environmental conditions are only marginally conducive for development, any additional increase in organization could lead to the formation of a tropical depression or tropical storm during the next day or so. Interests in the Lesser Antilles should monitor the progress of this system as it moves west-northwestward near 15 mph.
Dave Tolleris at WX risk says the next 24 hours are critical for this storm. He said there is a chance the storm may not form into a hurricane but if it does the odds will be high that it will make it into the Gulf of Mexico.
Gold (COMEX:GCU14) flat as deflation in EU offsets banking risks. Annual inflation in the euro zone fell in July to its lowest since the height of the financial crisis in 2009. Reuters reports Consumer prices in the 18 countries sharing the euro rose by 0.4 percent on the year in July, the weakest annual rise since October 2009 when prices fell by 0.1 percent, the EU's statistics office Eurostat said.
Annual core inflation--which excludes energy, food, tobacco and alcohol costs--stood unchanged at 0.8 percent for the second month in a row. Energy prices fell by 1.0 percent on the year in July, after a 0.1 percent rise in June, while prices of services were up by 1.3 percent for the second month running.
Coffee is percolating again. Crop Concerns at play!