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Daily Archives: July 22, 2009
By Izabella Kamkinska
Stephen Schork of the Schork report makes an excellent point regarding recent large US inventory crude draws.
As he explains, with reference to contango:
In other words, the market is paying you to build supplies by virtue of the discount on nearby material. If the recent run-up in price was based on real demand for wet barrels, then this discount would disappear, i.e. the market would be moving from contango toward backwardation. That is not the case at this time. Thus, the ongoing drawdown in U.S. crude oil supplies (outside of Cushing) is not demand driven, but rather a function of lower domestic production and fewer imports. In other words, refiners, as any good grocer would tell you, are aggressively emptying the shelves, as it were, of surplus material.
Oil prices fell on Wednesday ahead of the latest US weekly inventories data, while base metals were mixed and gold consolidated below the $950 an ounce level.
Nymex September West Texas Intermediate fell 89 cents to $64.72 a barrel while ICE September Brent lost 57 cents at $66.30 a barrel.
WTI has been trading at a discount to Brent, reflecting weak US demand conditions. Read more
China will use its foreign exchange reserves to make more overseas acquisitions, the country’s premier Wen Jiabao said in an interview.
Wen told diplomats he wanted China to hasten its ‘going out’ strategy, which refers to big investments and acquisitions overseas. Although China has made many big acquisitions in recent months, HSBC’s chief China economist Qu Hongbin said this was the “first official articulation” of a policy to directly support Chinese companies make foreign acquisitions. Read more
There is minor outrage over the French energy regulator’s decision that Voltalis, a company that installs energy-saving devices in homes, should pay electricity companies for the power it saves.
Voltalis was up in arms over the decision, as was the anti-nuclear power group Sortir du Nucléaire. But it’s not initially clear what the regulator’s rationale for the decision was. Read more
Exelon calls off hostile bid for NRG
NRG Energy votes to install own nominees to board (FT)
CFTC to hold first speculation hearing on July 28: Gensler
WIll focus on using commodities to hedge other risks Read more