The Energy Report
by Phil Flynn
Absolutely Astonishing
3/12/2010
HOT!HOT!HOT!
3/11/2010
The Energy Report for Thursday, March, 11, 2010
HOT! HOT! HOT! Inflation in China may be getting too hot to handle! Don't touch or you could get burned. Could emerging China bubbles turn the commodities bull market into rubble? China’s inflation rate for consumer prices came out at a much hotter than expected 2.7 percent. That was sizzling compared to Januarys 1.5 percent rise and it was also a 16 month high. This sharp increase will make Chinese officials worry about potential trouble spots and may make them more aggressive trying to battle those inflationary demons.
So far it is obvious that steps by the Chinese government to let some air out of their rapidly expanding bubble have been a failure. Despite the aggressive move to raise reserve requirements on banks and step back from standing behind regional banks, it's obvious China is going to have to take away more of the punch bowel to help extinguish these inflationary flames. Heck they may need to pour the contents of the entire punch bowel over the flames to put it out. Of course the problem is that once you put out one fire another one seems to creep up.
Take for example this wonderful piece in today’s Financial Times titled, “Fears grow over China property bubble despite efforts at cooling." The FT says that, “Chinese real estate prices accelerated last month, rising by their fastest pace in two years despite government efforts to cool the market amid fears of a looming property. Prices of commercial and residential property in China's 70 largest cities rose 10.7 per cent in February from the same period a year earlier, up from the 9.5 per cent year-on-year gain in January, according to China's statistics bureau. Since the start of the year, Beijing has introduced a series of policies aimed at cooling soaring property prices and a procession of senior officials has warned of overly fast price rises and bubbles in some markets. The figures released yesterday include subsidized and rent-controlled housing, where low price increases drag down the overall increase, as well as commercial real estate, where prices have been subdued or falling. Analysts say housing price increases are significantly higher - and this is what mostly concerns the government because they have a direct impact on people's lives and their satisfaction with Communist party rule.” A must read in today’s FT.
Of course at the same time China’s exports surged rising a whopping 45.7 percent from last year. Those strong numbers are going to increase pressure on China to allow their currency to increase in value as it is obvious that the dollar peg at this point is hurting other exporters. What is clear is that if the Chinese government fails to reign in these inconsistencies then the Chinese economy is on an unsuitable trek destined to crash. Oh sure I have heard that this time it is different, China is bubble proof! We hear it every time there is a bubble.
Day trading ranges are awesome! Did you get our latest trades? If you did not what are you waiting for! Call me today at 800-935-6487 or email me at pflynn@pfgbest.com to open your account. And make sure you see me every day on the Fox Business Network!
The API Catch Up
3/10/2010
The Energy Report for Wednesday, March 10, 2010
The API Catch Up.
It looks like the API is playing catch up to the Department of Energy. A massive crude build according to the American Petroleum Institute, along with big product draws is going to keep the oil market on edge.
The API released another shocker when they said that US oil inventories increased by an incredible 6.5 million barrels. Yet at the same time the API reported big time product draws. For gasoline the API reported supplies fell by 3.18 million barrels and gasoline by almost 3.18 million barrels. Yet is this a case of the API just catching up to the Department of Energy or does it mean something more significant to the marketplace. Last week the DOE said that US crude stocks stood at 341,571 million barrels yet the API’s total stood at 337,090. If you add this week’s 6.5 million barrel API build to last week’s supply it would put you up to 343,590 million barrels. That would put you just over 2.019 million barrels over last week’s Department of Energy total crude stocks. This coincidently is the same consensus estimate increase that the street is looking for. Is the API just playing catch up and does this mean that the DOE will report an increase of around 2 million barrels?
As far as gasoline is concerned, the drawdown of 3.18 million barrels that the API reported reflects strong demand. In fact according to the MasterCard SpendingPulse report gasoline consumption hit the highest level since last July. According to the report, Bloomberg News said U.S. gasoline consumption reached those lofty levels as West Coast storms subsided and milder weather returned to parts of the Gulf Coast. MasterCard said that motorists bought an average 9.62 million barrels of gasoline a day in the week ended March 5, up 2.5 percent from the week ended July 3, when drivers were filling their tanks for the U.S. Independence Day holiday weekend. Overall gas demand is up 1.5 percent from a year earlier. The API also reported a larger than expected drawdown in distillate supply of 2.8 million barrels. Last week the API total supply was 154,639 million barrels as compared to the Department of Energy which came in at 151,821 a difference surprisingly enough of 2.8 million barrels roughly the same amount of this week’s drawdown.
Snow storms and delays have played havoc with the numbers but it appears that unless the Department of Energy has big surprises for us, the numbers should get in line. Despite the wild moves we still know that as of right now we are well supplied in every category.
Yet if you believe the latest report from the Department of Energy’s Energy Information Agency this is no time to get complacent. The EIA is getting more optimistic on the global economy and at the same time global oil demand. The EIA projected that world petroleum demand will grow by 270,000 barrels per day to 1.5 million bpd bringing global consumption to near average 85.51 million bpd. Most of that growth is in Asia. In the US the EIA projected economic growth higher saying that GDP will grow by 3.4 percent, compared with 2.3 percent and 2.7 percent growth, respectively. The 2011 forecast for real GDP growth is relatively unchanged at 2.6 percent and 3.5 percent for the United States and the world, respectively.
Call me for the latest updates at 800-935-6487 email me at pflynn@pfgbest.com to open your account. And as always check me out every day on the best in business news on the Fox Business Network!
About Phil Flynn »
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