Is there life after clunkers? Hello, is anybody out there? The energy markets tried to get optimistic about the economic recovery after some very strong numbers on housing and manufacturing yet nagging fears in the banking sector and concern about the sustainability of these strong numbers caused energy to sink with a floundering stock market. Can a shocking bullish American Petroleum Institute number save the energy complex? Or are the bulls doomed.
Oh sure the ISM tried to wow us with a dazzling reading on its manufacturing index posting 52.9%, the first expansion number since January of 2008. Yet despite the fact that Obama said that this number showed that the economy was on the right path, the markets were not so sure. The President said the number means greater production of transportation equipment like cars and electronic equipment like computers and appliances, and it means these companies are starting to invest more and produce more. Yet what the entire market saw was clunkers and more clunkers. There seemed to be doubts that these numbers will be achieved again without the helping hands of Uncle Sam.
The same I guess can be said of the existing home sales. The number of pending home sales surpassed expectations rising in July by 3.2% making it the sixth consecutive monthly sales increase. If you compare sales to a year ago they increased by 13%. Of course many of those sale are inspired by the first time homebuyer credit and foreclosure driven declines in prices and short sales.
That type of mood was not helped by weak banking stocks. Rumors of another big bank failure seemed to dominate the market’s mood. Whether it is fact or fiction the stock market seemed to want to be scared because of the ghosts of September. As it has been widely reported by many, September is one of the worst months for stocks an had the markets going into risk aversion mode. We saw money run to the dollar, into gold and bonds and away from the oil. Today the market may really wonder whether or not last night’s API report was fact or fiction.
What is more volatile? The oil market or the week to week changes in the API report. The API reported an outrageous 3.2 million barrel drop in crude oil stocks. And if that wasn’t crazy enough they reported a build in gasoline supply to the tune of 2.8 million barrels. Come on! Bloomberg News was looking for a drop in gas supplies of 900,000 barrels not 2.8 million. And for crude oil, they were only looking for a 900,000 barrel drop! Maybe oil is leaking into the deep crevices of the earth and ending up deep under the Gulf of Mexico.
Well maybe so! Because BP announced what they say is a “giant” find in the Gulf of Mexico after drilling one of the industry's deepest-ever wells. The giant oil discovery was at its Tiber Prospect (well) in the deepwater Gulf of Mexico. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 metres) making it one of the deepest wells ever drilled by the oil and gas industry. Appraisal will be required to determine the size and commerciality of the discovery. AFP says that BP operates Tiber, owing to its 62-percent stake in the well. Its co-owners are Brazilian oil giant Petrobras, with a 20-percent interest and US group ConocoPhillips with 18 percent. Tiber represents BP's second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico.
Now how big is this discovery? We do not know. Dow Jones reports that the discovery could add 7%-10% to BP's existing reserves. If both Tiber and the nearby Kaskida discovery are developed, they could boost BP's output in the Gulf of Mexico by more than 60% to around 650,000 barrels of oil equivalent per day within the next 15 years, said a BP spokesman. Dow says that Tiber is larger than BP's 2006 Kaskida discovery, which is in the same geological region and contains around 3 billion barrels of oil equivalent in place. BP said it was too early to estimate the resources in place in Tiber. “Not all of this oil will be recoverable, and the company needs to do more work to figure out how much it will be able to extract", said a BP spokesman. The oil discovered in Tiber is light, which gives it a good potential for a higher recovery rate, he said. A 20%-30% recovery rate, which would be typical for this kind of field, would imply recoverable reserves of 600 million to 900 million barrels of oil equivalent.
When will you make the big discovery! Well you can start by discovering the Fox Business Network where you can see me every day! Call your cable operator today to get signed up. Make sure you sign up for my webinar! Call me at 800-935-6487 or you can email me at pflynn@pfgbest.com to open your account. See all the services that PFGBest has to offer! We have many platforms and Forex as well as ways to sweep money feature to different types of accounts. Find out how!
Sell October crude at 7250 - stop 7420.
We're short October heating oil from apprx 19000 - stop to 18700!
Sell October RBOB at 18500 - stop 18930.
Sell October natural gas at 310 - stop 317. .
