Monday, August 25, 2008

1) Oil: Biggest drop in 17 years

Crude prices fall by largest dollar amount since 1991 as investors fear the decline in U.S. demand could spread overseas as Europe's economies slow.

By Kenneth Musante and David Goldman CNNMoney.com staff writers

Last Updated: August 22, 2008: 3:18 PM EDT

NEW YORK (CNNMoney.com) -- Oil prices plummeted Friday, erasing the previous session's spike, as the dollar strengthened and investors worried that a decline in demand will spread outside the United States.

U.S. crude for October delivery dropped $6.59 to settle at $114.59 a barrel on the New York Mercantile Exchange.

The drop in oil was the largest single-day slide in dollar terms since Jan. 17, 1991, when oil fell by $10.56. On that day, President George H.W. Bush withdrew oil from the Strategic Petroleum Reserve ahead of the first Gulf War.

But in 1991, oil was trading at just $32 a barrel, so the more than $10 slide in dollar terms represented a record 33% drop. Oil fell 5.4% Tuesday, which does not even crack the top 50 price declines in percentage terms.

Oil's second-largest slide on Friday comes a day after the second-largest gain on record. Crude futures soared $5.62 a barrel Thursday to rise above $121 a barrel.

"We're trending towards a lot of oil price volatility on the direction of the dollar," said Peter Beutel, an oil analyst with Cameron Hanover. "There are huge amounts of money involved, and the large moves have been based primarily on dollar strength."

Dollar rebounds: The dollar rose after a key measurement showed British economic growth stalled in the second quarter.

The U.K.'s gross domestic product between April and June showed zero growth, the country's statistics office reported Friday.

The economic weakness in Britain signaled that falling demand for oil due to high fuel prices could spread to Europe, according to Kyle Cooper, director of research with IAF Advisors in Houston.

"Fewer trucks delivering packages, fewer people going to work ... There's a very strong correlation between GDP growth and oil usage," said Cooper.

The U.K. report follows other reports this week showing weakness in the euro zone and Japanese economies, putting U.S. investment - and the dollar - in a more favorable light.

A stronger dollar makes crude more expensive for foreign investors, because crude futures are traded in U.S. currency. Rising dollar values also pull investor money out of oil, since many use crude and other commodities as a hedge against inflation.

Georgia-Russia: Oil rose Thursday on tensions between NATO and Russia over the nation's occupation of Georgia. Georgia contains several vital pipeline links that carry crude oil and natural gas between Europe and Asia.

But those tensions appeared to ease Friday.

"There was the potential for some type of action across the Georgian border and we just haven't seen anything," said Neal Dingmann, senior energy analyst with Dahlman Rose & Co.

Also easing supply worries, a BP-led consortium prepared to resume oil flow through the region's Baku-Tbilisi-Ceyhan pipeline, a major oil link between Turkey and the Caspian Sea.

"We're still integrity testing," said BP spokesman Toby Odone, "We expect it will be back in normal operation next week."

U.S. gasoline demand: Falling demand for petroleum-based fuels in the United States has been the main force behind oil's fall from a record high of $147.27 in mid-July.

Demand for gasoline last week was about 9.5 million barrels a day, or 1.6% lower than it was last year, according to an Energy Department inventory report released Wednesday.

Drivers were also spending less time on the road in June, according to a second report from the Transportation Department last week.

Drivers will even cut back over the Labor Day weekend, according to a projection from motorist group AAA. The number of travelers avoiding cars and air travel, and using buses, trains, or other transportation will increase by 12.5% this year, AAA said.

National gasoline prices are down more than 42 cents a gallon from the record high set last month, according to the AAA's daily survey of service stations, falling below $3.70 a gallon.

2) Commentary by David Zwebner, CEO of CommStock Trading 

U.S. Economy
Federal Reserve Chairman Bernanke told a symposium at Jackson Hole, Wyoming that the current financial storm "has not yet subsided," but the "FOMC is committed to achieving medium-term price stability and will act as necessary to attain that objective." The September U.S. dollar index closed up .565 at 76.895, encouraged by the anti-inflation rhetoric. The June eurodollars closed down .135 at 96.785.

Grains
Statistics Canada estimated that wheat production will increase 27% this year to 25.4 million tons. They also estimated that soybean production will be up 17%, but corn production will be down 15%. December wheat fell 31.75 cents to $8.905. .

Orange juice
After the close, the USDA said that there were 1.42 billion pounds of frozen orange juice in storage, up 68% from a year ago. November orange juice ended up 1.15 cents at $1.0770.

Energies  
Tropical Storm Fay has a chance of disrupting oil production in the Gulf of Mexico next week, but winds appear to be weakening as the storm works its way west from northern Florida. Fay was the first storm in nearly 50 years that made landfall in Florida three separate times.

Today's stronger U.S. dollar and news of a weakening Fay helped October crude oil fall $6.59 to $114.59, lower than Wednesday's close.

Currencies
The U.K.'s Office for National Statistics revised its estimate lower to show no growth of real GDP in the second quarter. From a year ago, GDP was up 1.4%. The September British pound dropped 2.32 cents to $1.8489.

Eurostat reported that its index of industrial new orders for the Euro area 15 was down .3% in June. The September euro closed down .0099 at $1.4758.

David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com

3) A Fan of Forex?

Interested in reading perspectives and analyses on the Forex market?  In learning what factors affect the Forex market every week and what to be on the lookout for?  In getting trade recommendations?   Email mona@ecommstock.com  to get your copy of a weekly Forex report.

4) Closing Prices for Friday, August 22, 2008 

Amidex: Amidex35 (Class No Load Shares), $15.03; Index, 2171.13, Daily Change, 1.13%; “A” Shares NAV, $11.59.

Global Asset Management: Capital Appreciation, $271.53; Composite Absolute Return, $899.64; Diversity, $723.67; GAMCO, $903.26; Interest Trend, $251.62; Trading IV-US$ Class, $144.96; US$ Special Bond Fund, $441.78.

Invesco: Asian Equity Core, $4.49; Bond, $25.29; Emerging Markets Bond, $19.90; European Bond, EUR 4.3335;

Gilt, GBP 12.15; Global High Income, $11.65; Japanese Equity Core, $1.38; UK Equity, GBP 4.97. 

JPMorgan Fleming: JF Eastern Smaller Co., $95.67; JF Japan, JPY 15,979; JF Japan Equity, $11.77;

JF Japan OTC, JPY 974; JF Japan Smaller Companies, JPY 35,692; JF Japan Technology, JPY 46,629; JF Korea, $38.28;

Pacific Securities, $180.30; Pacific Smaller Companies $21.32; Global Bond & Currency, $21.53;

JF America, $43.30; JF Europe, $43.02; JF Germany, EUR 20.15; JF Global Equity, $38.71.

PCP: North America, $11.78; Europe, $18.77; Emerging Markets, $17.09; Balanced, $8.29; Aggressive, $6.80.                                                                                

Platinum (updated once a month – July 2008 Prices): All Weather, $128.75; Equity Plus, TBA; Prot. Equity Plus, TBA; Cap. Prot. Income Plus, TBA; Cap. Prot. Income Plus A, TBA.

Scottish Provident: Adventurous 1, GBP 2.790; Balanced 1, GBP 2.295; USD Adventurous 1, $2.197;

USD Balanced 1, $2.139; USD Cautious 1, $2.034; For Preference: Baring GUF Eastern Europe, $130.00; Fidelity Funds International, $33.26; Invesco Asian Equity Core, $4.480.

Mona Liss
CommStock Trading Ltd
PO Box 7777
Jerusalem 91077
Tel: +972-2-6244963
Fax: +972-2-625 9515