Could The Oil Market Crash?
Housing starts rose .2% to an annualized rate of 2 million, but at a
slower pace than expected. Building permits
fell 4.6% in May, the largest decline since last June. Jobless claims for
the week ending 6/11 rose 1000 to 333,000; the 4-week moving average is 335,000.
The Philly Fed index slid to -2.2 in June after a 7.3 reading in May.
A Morgan Stanley economist said that the oil
market may be headed for a massive crash. Reason cited are: slackening
economic growth, alternative energy gains and traders sensing a price peak.
Recently, Goldman Sachs outlined a super spike scenario with oil over $100 bbl.
Oil prices are up 28% since January. A Reuters poll showed analysts expect
an average crude price of 48.71 this year and 44.18 next year. Oil hit a record
high April 4 at 58.28. Saudi Arabia Oil Minister Ali al-Naimi
blames a lack of refining capacity on continued high prices. OPEC’s Al-Sabah
said that heavy oil demand in China is a major factor behind $55-a-barrel oil.
China accounted for more than a third of the
increased oil demand last year. OPEC also urged industrialized countries to
build more refineries, saying that with spare capacity the lowest in a
generation, prices could spike to new record levels. The cartel raised its price
target for crude to $50/barrel, saying that prices would have to trade above
this level for seven days before they would consider any quote increase.
The U.S. Dept. of Energy said that underground
natural gas supplies are up 12% from a year ago.
The yield curve could invert, says Stephen
Major of HSBC, if the Fed continues increasing rates.
The last time the curve was inverted was
2000.
With fewer than three months left in the season,
corn exports are off 7% from a year ago; soybeans, up 22%, and
wheat down 34%.
Gold rallied to a 7-week high on heavy
demand and struggling mine production. Copper is up, near 17 year highs
again. A powerful earthquake heightened supply fears. Commodity heavy country
indexes are strong (i.e. Canada, Australia).
Marin Capital is closing and returning $1.7 billion to investors. Their
flagship fund–the Tiburon Fund–was down 3.86% for the first 5 months this
year. The company said is closing because of weak prospects in the convertible
bond and credit arbitrage markets. Last year the fund imposed limits on
investors wanting to pull out money. Hedge Fund Bailey Coates has gone
from $1.3 billion at its peak to $470 million today. The firm was faced with
forced liquidations in April and May and is entirely in cash now and talking to
investors about raising additional funds. Trader talk: will this mean more
hedge fund shutdowns?
You think housing prices have soared in the United States? Take a look
at the 3-year appreciation in these countries (source: The Wall Street
Journal):
South Africa   +95%
China            Â
+68%
Spain            Â
+63%
Australia         +56%
U.K.              Â
+50%
Bulgaria          +50%
Brice Wightman