Why Oil Finished Lower Ahead Of Thursday’s OPEC Meeting
Today’s big 2-year note
auction by the Treasury Department had
better than expected results, alleviating downward pressure caused by a stronger
equity market. Meanwhile, oil finished lower despite tomorrow’s big OPEC
meeting.
Equities
The equity markets continue to hold on to their
recent gains on the back of better than expected earnings. The S&P contract
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up 8.00 to finish at 917.50,
and the Dow
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finish at 8491. The Nasdaq also was also aided by indications, in the Fed Beige
Book survey, of an increasing demand for tech equipment and semiconductors. As a
result, tech heavy index
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9.50
and closed at 1113.50.
Fixed Income
Today’s 2-year Treasury auction went better than
expected as the notes were awarded just below the yield level at which they were
trading before the 1 pm auction time. This auction is the first in a series of
auctions that are expected to see higher than average offerings due to the
burgeoning budget deficit Overall, short end and long end Treasuries
finished higher and intermediates closed lower. The 10 year futures contract
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was down -030 to close at 113-31; the 30 year
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down 0-015 to close at 112-255
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Metals
The industrial metals finished firmer today.
Copper was down .20 to finish at 72.35
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finish at 331.90 , and silver
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4.6250.
Energy
Crude oil fell to a five month low after the US
reported the biggest inventory increase since October (pre UN resolution 1441),
fueling doubts that OPEC will be unable to control a looming supply glut. US
inventories rose by 9 million barrels, or 3.3% to 286 million barrels. And
further adding pressure to crude was the news that engineers have started
pumping oil in Iraq for the first time since the start of the war. And although
the oil is not for export, this quick turnaround in production indicates that
prewar production levels could be attained in weeks. Oil July futures (new
month)
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gas
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Currencies
The US dollar was up against most currencies
today, except the UK pound and the Mexican peso (highly correlated to the US
equity markets). And although the euro is still hovering near the top of the
monthly range it weakened slightly today. The USD index
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.03 and
finished at 99.02.