Author: lindsay

The Crude Oil Red Flag Is Up - (I will proceed with caution)

Posted on by lindsay

It sure is hard to ignore the news. Although one of Adam's "Golden Trading Rules" is... "Don't listen to the news, listen to the markets," it is hard to cut yourself off from reading headlines. Use news as a red flag, but not a panic button... let the market do its thing before you react in response to an article, TV story, etc. Keeping that in mind I thought the article below was interesting read and was a story that threw up a red flag for me when looking at the Crude Oil market.

Enjoy and happy trading. Oh and I think I am the only staff member that forgot to send Happy New Year greetings, if that is the case... HAPPY NEW YEAR - I hope this is your most prosperous new year yet!

Oil prices up slightly ahead of inventory report

Associated Press

VIENNA, Austria -- Oil prices rose Wednesday amid expectations a U.S. government report will show crude oil stockpiles fell last week.

Prices were also supported by fears of further violence in Nigeria, the world's eighth-largest oil producer.

Analysts surveyed by Dow Jones Newswires predict crude inventories likely fell 800,000 barrels last week, while supplies of distillates, which include heating oil, likely fell 300,000 barrels. The U.S. Energy Department's Energy Information Administration will release the report later Wednesday.

"That would be the eighth consecutive week of crude oil stock draws and U.S. crude oil inventories are already below the five year average for this time of the year," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Light, sweet crude for February delivery added 24 cents to $96.57 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. The contract rose $1.24 to settle at $96.33 a barrel on Tuesday. Oil was also being supported by a surge in the price of gold, analysts said. Gold futures surged above $880 an ounce Tuesday to their highest level ever, not accounting for inflation.

"Part of the recovery of oil yesterday and this morning is due to fresh investor funds coming into oil and commodities," Shum said.

Reports that Nigerian militants are planning attacks on the nation's oil facilities were also sending prices higher. In a research note, Vienna's PVM Oil Associates noted that the country had "already lost some 15 percent of crude output capacity" due to violence. Still it forecast increased production of around 2.35 million barrels a day for this year, up from last month's 2.22-million barrel daily output.

A monthly EIA report Tuesday predicted oil supplies will be tight this year but ease in 2009. The EIA slightly raised global oil consumption growth forecasts, and said the Organization of Petroleum Exporting Countries will likely supply nearly a million more barrels of oil per day this year than previously expected.

The EIA predicted oil prices will average $87 a barrel this year, up from a previous estimate of $85. The average price will then fall to $82 a barrel in 2009, it said.

In London, February Brent crude rose by 35 cents to $95.91 a barrel on the ICE Futures exchange.

Heating oil futures rose by less then a penny to $2.6424 a gallon (3.8 liters) while gasoline prices slipped marginally to fetch $2.4703 a gallon. Natural gas prices jumped by more than 18 cents, selling at $8.151 per 1,000 cubic feet.

Longer term projections for the direction of oil prices remain bearish, however. On Wednesday, the World Bank became the latest institution to predict that prices will likely decline gradually this year and next as crude demand weakens in the face of record prices.

"If you look at the fundamentals, there is scope for lower oil prices," said Hans Timmer, co-author of the bank's annual "Global Economic Prospects" report, at its launch in Singapore. "We forecast more or less a sustained, gradual decline."

A barrel of light, sweet crude surpassed $100 a barrel on the New York Mercantile Exchange for the first time last week.

The World Bank's report predicts that a barrel of crude oil will cost $84.10 on average this year and fall by 6.8 percent to $78.40 a barrel in 2009. It estimates that the average price of crude oil last year was $71.20 a barrel.

The forecasts are based an average of three benchmark oil prices: Dubai, Brent and West Texas Intermediate.

As demand wanes, OPEC countries have had to reduce their production by a million barrels over the last three quarters to a year to keep prices high, the economist said.

Dollar higher in thin trading on last day of 2007

Posted on by lindsay
Despite U.S. strong-dollar policy, greenback did not have winning year

SAN FRANCISCO (MarketWatch) -- The dollar managed gains against most major counterparts Monday, in extremely thin trading conditions on the last day of what was not a winning year for the greenback.

The dollar was on track to lose more than 10% against the euro, more than 6% against Japan's yen and about 2% on the British pound sterling. The dollar index, which tracks the U.S. unit against a basket of six major currencies, was down more than 8%. "2007 is likely to go down as a year that defenders of the dollar would like to forget," said Adam Hewison, president of INO.com, a technical-analysis site. "I would hate to think what would happen to the dollar if the current administration had a weak-dollar policy," Hewison added, referring to the strong-dollar policy that U.S. Treasury Secretary Henry Paulson consistently maintained was in place in his remarks throughout the year. Late Monday, the dollar index was at 76.675, up from 76.190 in late U.S. trading Friday.

The dollar was buying 111.65 yen, down from 112.55 yen late Friday. The euro was trading at $1.4587, down from $1.4715 Friday. In November, the euro rose as high as $1.4967, which was its highest level since Europe's united currency began trading in January 1999. The pound was at $1.9865, down from $1.9932 Friday. The dollar gained against its Canadian counterpart Monday, but was still on track to lose more than 17% for the year. The greenback bought C$0.9981, up from C$0.9805 Friday. In September, the loonie reached parity with the U.S. dollar for the first time since 1976, and hit a modern-day high of C$1.1039 in November.
On Wall Street, stocks closed down Monday but still posted gains for the year. Lingering housing woes. Most analysts ascribed the bulk of the dollar's 2007 woes to the subprime mortgage meltdown and subsequent credit crisis in August, which led the Federal Reserve to embark on monetary easing the following month. Lower rates pressure the dollar, because they reduce the returns on dollar-denominated assets. The Fed's easing was eventually followed by interest rate cuts by the Bank of England and the Bank of Canada.
"At the end of a year which saw the worst credit crunch in over a decade, a deterioration in the outlook for the US economy and the start of a rate cutting cycle by the Fed, followed by the BOE and BOC, markets are closing the year still concerned about the financial markets and the U.S. economy and are pricing in further Fed easing," wrote currency analysts at Brown Brothers Harriman.

Some analysts don't expect a repeat of 2007's dismal dollar performance in the year to come. As the subprime fallout continues to spread to other parts of the globe, the dollar's relative appeal will grow toward the latter half of the year, as U.S. investors bring assets home.
Earlier Monday, data from the National Association of Realtors offered a glimmer of stability in the beleaguered housing sector, showing that sales of existing homes rose 0.4% in November to a seasonally adjusted annualized rate of 5 million, in line with expectations.
But analysts cautioned that the modest uptick likely doesn't herald a turnaround in the sector. "Despite the good news in this report, we could just be in the eye of the storm, as a significant number of mortgages reset early in 2008 will likely increase delinquencies and foreclosures driving prices lower and pushing buyers away," wrote Benjamin Reitzes of BMO Capital Markets Economics. "This could get even worse before it gets better," he added.

Upcoming data
After the holiday, investors will be watching key data releases this week for clues on how the U.S. economy is faring, and whether more interest rate cuts lie ahead. The Institute for Supply Management's manufacturing and non-manufacturing surveys are scheduled for release at 10 a.m. Eastern on Wednesday. Analysts surveyed by MarketWatch are expecting the manufacturing index to be roughly flat in December.
Then on Friday, the nonfarm payrolls report is expected to show that payrolls increased by 70,000, according to economist surveyed by MarketWatch.

Lisa Twaronite reports for MarketWatch from San Francisco.

FOREX-Dollar rises vs yen as trading volume thins

Posted on by lindsay


By Steven C. Johnson

NEW YORK, Dec 18 (Reuters) - The dollar gained on the yen on Tuesday as traders covered their bets against the greenback and began taking profits ahead of year end.

Volumes were thin as investors began closing the books on 2007, leading to jittery trading influenced heavily by technical factors and flows, traders said.

The European Central Bank's extension of $500 billion in two-week loans to euro-zone banks also helped ease anxiety about a year-end credit squeeze, traders said, prompting some investors to wade back into yen-funded carry trades.

"The ECB provided a bit of systematic relief, and that's led to some renewal of risk-taking activity," said Robert Fullem, vice president of corporate foreign exchange sales at The Bank of Tokyo-Mitsubishi-UFJ in New York.

"But it is a very thin market out there, and the few orders that are out there are keeping currencies in ranges," he said.

Investors have long borrowed yen at low Japanese rates to fund purchases of higher-yielding currencies and assets. As a result, the yen's fortunes wax and wane in inverse proportion to market risk appetite.

Late afternoon, the dollar was up half a percent at 113.38 yen

The euro traded at $1.4403

Analysts said the ECB's massive injection bolstered the argument of dollar strength against the euro into year end.

"There is talk that some foreign banks (e.g. U.S. and UK) may have taken in funds as well and at lower rates than they can secure from their respective markets," wrote Win Thin, currency strategist at Brown Brothers Harriman in New York, in a note to clients.

"This may lead to some euro sales as the borrowings are converted and/or hedged. The foreign exchange implications of these money market operations are on the margin, but maybe part of the firmer dollar story that many will overlook," he said.

Investors are also awaiting Wednesday's results of this week's liquidity injection plans by top central banks.

The dollar has benefited over the past week from unexpectedly strong U.S. retail sales and inflation data, which fanned speculation that the Federal Reserve may be less aggressive in cutting interest rates next year.

However, the latest Reuters poll still shows a 40 percent chance of a U.S. recession next year.

The Fed is expected to cut its benchmark overnight lending rate twice by 25 basis points to 3.75 percent in the first half of 2008 and leave monetary policy unchanged for the rest of the year, the poll showed. For details, see .

Adam Hewison, president of INO.com, an information service for traders in Shady Side, Maryland, said the dollar looks poised to continue rallying in early 2008 after falling sharply against most major currencies this year.

"We have seen a fairly healthy correction here. I think we're going to see much more two-way trading in the first and second quarters of 2008," he said.

If interest rates stabilize, he said traders will be pushed to cover dollar shorts, setting the euro up for a test of $1.40 and sending the dollar back into the 118-120 yen range in the first half of the year.

"Bears often make the best bulls and they will have to cover their short positions sometime," he said.


Steven C. Johnson reports for Reuters

(Additional reporting by Lucia Mutikani; Editing by Jonathan Oatis)

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