Oil Stalls to Close Below $60

U.S. 10-year Treasury bond prices fell off recent
highs today, after a Fed official commented that more tightening would come
before a rate cut. Bond prices usually rise on economic weakness and fall
on strength; inflationary worries and rate hikes usually equate to a growing
economy. Bond traders took the comments as a positive for the U.S.
economy, sending prices lower on the day. Bond prices initially shot
higher in June, when the Fed initiated a rate pause on the grounds of slowing
growth and moderating inflation. Bond prices rose through the second half
of 2006, on weak economic numbers from the U.S. However, since December,
U.S. economic numbers have been surprisingly positive, which has led to a fall
in bond prices.

The yen fell against the dollar, and pushed
against record lows versus the euro, on speculation that the G-7 committee
meeting will not focus on yen weakness this weekend. Earlier in the week,
the yen rose on rumors that the G-7 meeting this weekend would focus on yen
weakness, and ways to increase the strength of the Japanese currency.
However, officials in both Japan and the U.S. discounted those rumors, and the
yen moved lower against the dollar and the euro. The international
currency market has favored currencies backed by inflationary, positive-growth
economies, which Europe has proven itself to be. Japan has struggled to
consistently produce positive numbers, which has led to yearly lows against the
dollar and record lows against the euro. The U.S. has managed to pull
itself up, posting positive numbers which helped to propel the dollar off of
yearly lows against the euro.

Oil rose fractionally today to close just under $60 a
barrel. Crude prices pushed higher than $60 intraday, but lost those gains
as the day progressed. Oil spent all this week pushing to break
resistance, but only closed up fractionally higher. Crude fell more than
30% from July record highs, on high levels of U.S. supplies and a late-arriving
winter. Since mid-January, though, crude has been steadily rising, as
winter rolled in and the U.S. announced plans to double its oil reserve.
Natural gas futures traded down about 0.5% on further speculations that U.S.
supplies can handle any winter spike in demand.

Gold futures rose 1.4% to 6-month highs, on
speculation that oil will continue to rise. Gold usually trades inversely
to the dollar and with oil, and it was oil action that dominated today’s
trading. Although crude didn’t hold 60, the intraday break of resistance
did much to increase speculation that crude is on the rise, and will continue to
be into the near future. Investors turn to gold as a safe-haven in the
face of rising energy prices. Copper futures rose nearly 3% today.

Grain futures rose across the board. Corn
futures rose 1.5%, wheat rose about 0.75% and soybeans rose 0.6%.


No major economic
news to report for the U.S. today.

John Lee

Associate Editor