TLM Huge Crosses After Close

The close: Oil to the rescue Wednesday, June 18, 2008

Canada's benchmark index eked out a gain on Wednesday afternoon after the price of crude oil lifted energy stocks toward the end of the day, but financials remained weak.

The S[amp]amp;P/TSX composite index closed at 15,073.13, up 4.3 points but flat in percentage terms. The energy sub-index, down with the price of oil throughout most of the day, bounced to a 0.9 per cent gain in the afternoon after oil prices rebounded to $136.33 (U.S.) a barrel, up $2.32. EnCana Corp. rose 2 per cent and Canadian Natural Resources Ltd. rose 2.6 per cent.

Financials, meanwhile, looked ugly from the get-go, when Morgan Stanley reported a steep drop in its second-quarter earnings, Fifth Third Bancorp sliced its dividend and a hedge fund manager warned of enormous losses and writedowns still to come. In Canada, Manulife Financial Corp. fell 1.5 per cent, making it the biggest single drag on the index, Royal Bank of Canada fell 1.3 per cent and Toronto-Dominion Bank fell 1.7 per cent.

In the United States, the rebound in oil prices did not help matters, of course. Plus, investors were gloomy after FedEx Corp. shocked the market with a fiscal fourth-quarter loss and lower guidance for the first quarter – a sign that high energy costs (surprise!) and lower economic activity (surprise!) are biting the bellwethers. FedEx shares fell 2.1 per cent.

The Dow Jones industrial average closed at 12,029.06, down 131.24 points, or 1 per cent - its second triple-digit loss in two days. The index dipped below the 12,000-mark – a psychological hurdle for investors and observers who like round numbers – for the first time since March, falling as low as 11,994 in afternoon trading.

The broader S[amp]amp;P 500 closed at 1337.81, down 13.12 points, or 1 per cent. Fifth Third Bancorp plunged 27.3 per cent and dragged down other regional banks. Regions Financial Corp., for example, fell 10.5 per cent.

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© Copyright The Globe and Mail

Oil No bubble trouble?

No bubble trouble?

Wednesday, June 18, 2008
How should investors interpret the latest findings from a UBS survey on attitudes toward oil prices?
The UBS survey of 1048 equity analysts and strategists concluded that most investors do not believe that oil prices are[amp]nbsp;a bubble about to pop: When asked “Are energy prices in a ‘bubble' similar to tech or real estate?”,[amp]nbsp;56 per cent of respondents answered ‘No' and 44 per cent answered ‘Yes', according to UBS.
“Our interpretation of results: it is no longer ‘contrarian' to expect prices to stay high,” said Thomas Doerflinger and David Bianco, strategists at UBS, in a note to clients.
Some people believe that you can't have a bubble when just about everyone believes there is a bubble – because that widespread skepticism would translate into rational prices. On the other hand, if few people believe there is a bubble, then prices have the means to keep rising. This is surely what drove the tech bubble in the late 1990s, when the "new era" view dominated those who said "this is nuts."
Contrarians might look at UBS's all-clear signal on the price of oil as a reason to be fearful that a bubble is indeed forming. Crude oil traded at $134.80 (U.S.) a barrel on Wednesday morning. So far this year, the price has risen just over 40 per cent.
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© Copyright The Globe and Mail

Oil hits record, nears $140

Oil hits record, nears $140

JOHN WILEN
Monday, June 16, 2008
NEW YORK — Crude oil futures hit a record near $140 (U.S.) a barrel Monday as investors shrugged off Saudi Arabia's promise to boost production and instead focused on a weaker U.S. dollar. Retail gas prices rose to a record $4.08 a gallon.

Light, sweet crude for July delivery soared to a trading record of $139.89 before retreating to trade up $2.10 at $136.96 a barrel on the New York Mercantile Exchange.

Many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline is a major factor behind oil's doubling in price over the past year.

The euro bought $1.5502, a sizable increase from $1.5354 late Friday in New York. The British pound rose to $1.9668 versus $1.9469 in New York.

Also supporting prices was an overnight fire at a StatoilHydro ASA drilling rig in the North Sea, which could affect as much as 150,000 barrels of daily oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note.
But prices of North Sea-produced Brent crude oil, while higher, were lagging Nymex crude's advance, suggesting to analysts that the dollar was the main driver of Monday's rally. In London, August Brent crude futures rose $1.91 to $137.02 a barrel.

“We have a weaker U.S. dollar, and the buyers are out in force right now,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Saudi Arabia, the world's largest oil producer, told UN chief Ban Ki-moon over the weekend that it would boost output by 200,000 barrels a day, or by 2 per cent, from June to July. In May, the kingdom raised production by 300,000 barrels a day.

The latest promise of a production increase by the kingdom was largely ignored by traders Monday amid strong global demand and falling production elsewhere.

“Saudi Arabia's proposed output addition will only go some way in offsetting the significant output losses in other OPEC nations like Nigeria,” said Barclays Capital analyst Kevin Norrish in a research note.

Mr. Cordier said Saudi Arabia has “to increase by north of 1 million barrels per day” to have an impact on prices, “and the market doesn't think they have it.”

Saudi production hikes can actually push oil prices higher by stoking concerns about spare oil capacity — the reserves Saudi Arabia holds out of production in the event of an unexpected global supply shortfall.

According to the International Energy Agency, OPEC spare capacity fell below 2 million barrels a day in May for the first time since 2006. The majority of that — about 1.45 million barrels a day — was in Saudi Arabia.

At the pump, meanwhile, the national average price of a gallon of gas rose 0.3 cent overnight to its latest milestone, according to AAA and the Oil Price Information Service. Gas prices are following crude prices higher, and likely have several more cents to rise before catching up with oil's latest advance.

If oil prices pass $140 and head even higher, the pain consumers are feeling at the pump will intensify.

Diesel fuel prices held steady Monday at a record $4.797 a gallon. High prices for diesel, used to transport most of the world's food, are pushing food prices higher, putting even more pressure on consumers.

In other Nymex trading, July gasoline futures rose 3.58 cents to $3.4984 a gallon, while July heating oil futures rose 7.57 cents to $3.9125 a gallon.

July natural gas futures rose 29 cents to $12.915 per 1,000 cubic feet.
Anadarko Petroleum Corp. said Monday that natural gas production from a project in the deep waters of the Gulf of Mexico has been restored, hitting a gross rate of about 900 million cubic feet per day. Output from the Independence Hub was halted April 8 after a pipeline leak was found.
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