Thursday May 20th, 2010

Regarding the two causes, or over excused causes, a strong dollar and continued worry of the economic toppling of Greece and its domino affect on other European nations. The current effect of this information or lack of information, has the energy market continuing its downward tread. I am finding it difficult to actually understand what kind of economic crisis Greece is in other than mixed reports and little first hand matter of fact information being provided. The latest report has their government lowering wages and hiking taxes; (Sounds familiar, where have I heard that before?) which has in sighted 25,000 citizens to take the streets in protest. Of course this behavior is killing what tourism was still occurring, which accounts for 20+ percent of the Greece GDP; tourism also accounts for one in every five jobs in Greece.

So what does this have to do with energy prices, and how does it effect our US economy?
Well for starters Europe is our largest export market, our largest trading partner; With 20% of exports going directly to Western Europe. The US economy is not directly tied to Greece itself other than small loans and tourism, but fear the over borrowing throughout the Euro world is too far gone or over lent is the lingering problem. As the European markets tighten and possibly stagnate, this will have a ripple effect on our economy,which will most likely carry a heavy impact on fuel use, domestic and foreign.(further reduction in manufacturing and air travel) It seems to be the big picture investors are looking at as they exit the crude market for higher ground.
Crude is down 22% from its April 6th high of $86.84, settling today at $68.01. Today was the end of the June contract, tomorrow starts a new month with about a $2.00 carry to July, $69.59, down a $1.20 in overnight trade.

How about the products that matters to you:

Gasoline today followed the complex with losses of about a nickel on the futures. Gas showed draws of 300.000 bpd, with four week demand up 2.1% from this time last year. You should be paying $2.84 or so for gas in this market if your not hunt around its out there. Hint, hint.

Diesel also traded lower once again, down about four cents on the futures. Diesel saw draws this week of a million bpd, which is wildly off from expectation of 1.3 million bpd builds. Also interesting to see was the large jump in diesel demand, up 12.3% from this time last year. (four week average)

This weeks DOE report would appear at first glance to favor bullish turnabout, but Cushing, Oklahoma reported once again record inventory, causing large concern over what we are judging the market on. So while things are improving from last year,which wasn't exactly banner, inventories are still too high for investors. I look for continued volatility as we enter a new contract month of trading, we are now aways from $65 crude, but it wont take long to get back there with $2.50 wackes. If you don't need to fill your tank, don't, the prices are getting better in the short term.
Well if your still reading, sorry so winded this evening, I didn't find a ton of conversation on my cold calls today.
Good evening and thanks for reading. Feel free to respond, by clicking "comments".

Zach Winter