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August 07, 2013

Macroeconomic Factors

  • All of the other U.S. macro data has shown improvement — ISM manufacturing and services, regional Fed reports, the trade balance, and the weekly initial claims series.
  •  There are also positive reports – for a change – from Europe, where the recession seems to be ending. Japan is improving.
  • The China story is not one of recession, but it does matter how much Chinese growth slows.

Potential Risks

Short term oil pricing is uncertain leading into mid-August. The Washington Post reports that market trading volume has decreased in anticipation of new reports from a number of sources:

“The U.S. Energy Department, the International Energy Agency and the Organization of the Petroleum Exporting Countries all this week release their latest assessment of the energy markets, which includes a forecast for worldwide demand for oil. Analysts are anticipating some downward revisions, given a slowdown in China’s economy.

‘The slowed Chinese growth will be demanding of additional downward adjustments in global demand estimates by the various agencies,’ wrote Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients. The market did have a swing of about $2 during Monday’s trading. A week ago, oil jumped nearly $5 on Wednesday and Thursday as the global economic picture seemed to brighten, even as central bankers in the U.S. and Europe indicated they’d maintain programs that helped to keep interest rates low. Then Friday, disappointing figures on hiring in the U.S. pushed oil down by 95 cents, though it still ended the week with a gain of more than $2 a barrel.”


The newest forward price curve shows that overall prices in August are projected to be at their highest since April, when a number of refinery setbacks began to push prices higher – earlier than is usually expected. The normal seasonal pattern is in evidence. What could change things? Hurricane season. We all hope that everyone stays safe and well, but hurricane risk is a part of the energy business.

To download a more detailed version of this report CLICK HERE.

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