Crude Oil Hits Record High, Here’s Why
Once again energy dominated the
headlines today as Crude Oil surged to another record high. The US
embassy in Saudi Arabia was closed due to a security threat, adding to fears
that refiners are running at full capacity but are unable to meet global demand.
Over the past two weeks a number of US refineries have been shut down
unexpectedly. At the end of July reserves hit the lowest level since November
2004.
Crude Oil +2.47% closed at $63.85, while Harbor
Unleaded +1.52% was highlighted in the
TradingMakets.com Momentum 5 List on Friday and closed at a record high
today, unleaded gas futures are up 71% this year. Heating Oil +3.36% was
the biggest percentage gainer in the energy complex.
Grain prices were generally higher as hot, dry weather swept
across the Midwest. The hot weather is expected to continue for the next 3 days.
Corn +0.53%, Soybeans +0.26% and Wheat +0.45% all closed
higher. Corn and Wheat were both highlighted in the
TradingMarkets.com Implosion 5 List on Friday.
Coffee -2.85% sold off late in the session. Coffee
futures were flat most of the day but declined heavily in the final hour of
trading.
Treasuries continued to decline as the bond market fears
strong US growth will force the Federal Reserve to continue raising interest
rates well into 2006. Goldman Sachs raised their forecast for the Fed funds
target rate to 5% by the middle of 2006. In the past week Lehman Brothers, Bank
of America and Barclays Capital have all raised their estimates.
The US 10yr T-Note -0.14% is in the midst of a 6-week
slump, while yields on the US 2yr T-Note are now 88 basis points above
the Fed funds target rate. The spread was just 39 basis points on June 30 and
the move higher is an indication interest rates will continue to rise. The 10yr
T-Note has been highlighted almost daily during this decline in the
TradingMarkets.com Implosion 5 List.
Economic News
No economic news to report today.
Ashton Dorkins