Evacuations from oil rigs and platforms located in the Gulf of Mexico prompted by the approaching tropical storm Fay has allowed the price of crude to rise for the first time in the last few days. This region contributes almost one fifth of the oil production in the US and hence is strategic. The storm threat resulted in the evacuation of its workers by the Royal Dutch Shell and Transocean Inc., though the offshore activities of the companies remained largely unaffected.
This surge in oil prices is also seen as a result of overselling and hence is been seen as a time with buying opportunity. Prices which had initially fallen to as low as $113 .25 was later sitting pretty at about $115.35 by September. Fay is the third storm to hit the US shores in 2008 with a capability of handicapping the offshore oil and natural gas production of the United States. The New York oil futures as on 15 August was trading at $113.77 down almost 1.1 percent and had the same day witnessed a low of $111.34.
This region is not new to storms and has routinely witnessed rough weather which cripples the drilling of oil and the movement of oil tankers. This rise in oil prices is not seen as something which will hold on for long if the damage by the storm is only of a minimal degree. It is to be noted that in the month of July crude was trading at its all time high price of $147.27 per barrel. The Dollar has also reported a rise in its trading price against the Euro for the fifth consecutive week.
The Dollar has risen by 2.2% against the Euro as reported in the week gone. Citing the market fundamentals to be in “perfect equilibrium” Venezuela, a member of OPEC, confirmed that there does not seem any need to increase the outflow of oil in the market hence OPEC would not be increasing the output.
Tags: dollar, dollar rate, dollars, oil prices, us economy, us stocks
What has become quite evident from the recent past that the two major factors driving the stocks up are commodities, majorly oil and dollar. With the dollar gaining impressively against the Euro and Pound in forex markets with figures of 2.2 and 3 percent respectively and oil prices falling to about 1.2 percent to settle at $113.77 per barrel, the strengthening of stocks was all but evident.
The NASDAQ finished the week up 1.6%. Major contributions to this upswing was shared by the telecoms sector, the consumer staple sector and the technology sector which showed an increase of 2.2%, 1.5% and 1% respectively. The S&P sector affected badly due to the analysts downgrade of Goldman Sachs was the worst performer and was down almost 3%. As per my view, US economy is heading for a prolonged slowdown. Demand has slowed and confidence of the industry has come down for investing further. What effect this could have in future on emerging economics. I think it will depend on how much export oriented the economy is and how much is the level of the domestic demand. For example, economies of countries like Thialand, Malaysia etc have already showed signs of weaknesses due to cancellation of huge export orders.
What would be interesting though would be to see how long this trend of strengthening dollar and falling oil prices would continue. It has been quoted that with economic data fluctuating too much it would be oil which would steer the market although the same is not likely to show any major weaknesses in future. In times to come it will be very tough to find any other factor apart from commodities which would carry an influential impact on the market unless we find some crazy merger or pullout coming up. The market has found the path of least resistance with low commodity prices and a strong dollar. But will all these analysis the ongoing Russia-Georgia conflict could prove to be the dark horse in emerging out as to being the key element.
This conflict has already increased the transaction of dollar in comparison to the Euro currency hence strengthening the dollar. The larger picture speculated from this conflict is that the region heading for a second cold war which would prove to be a big blow for globalization as in today’s time everybody in the world is linked to each other no matter which part of the world they might be in.
Tags: dollar rate, oil prices, stock market
The continuous drop in crude oil prices to reach almost $120 a barrel from once astronomical figures might come as a relief to the wallets of strapped customers already burdened by increasing layoffs and no increments in wages but a closer inspection reveals a situation not all so rosy. This unprecedented fall in crude prices portrays the grim situation in which the US economy is stuck today. This decline is depicting the consumer recession in the barest of forms.
An increase in the crude oil prices meant a drastic cut in the shopping spree episodes hence causing a serious dent to the economic growth of the country. A weak economy would further lead to a rise in the number of layoffs and subsequently make life tougher for the common man. With reports coming in everyday of companies slashing production and closing down units it surely is a serious situation at hand. It has been reported that the earlier irrational rise in crude prices lead the American’s to drive around 4% less to the amount that they were driving a year ago.
The Americans, known for their lavish lifestyles and spending capacities, could afford to live a life of luxury due to easy availability of loans and mortgage from banks. But the recent economic meltdown has gagged this option as banks are no longer keen and upfront to provide easy money. With the unemployment rate climbing to a 4 year high to reach 5.7%, this drop in crude prices can in no way get back the jobs of hundreds who lost their livelihood to the economic clampdown.
With the damage done by the surging prices all that this fall has provided is a few extra change and cents in the pocket, a pocket in dire need of repair in strained economic times.
Tags: dollars, oil prices, us economy