The Banking and Strategy Initiative

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US Economy: Free fall in Oil prices to continue, even as offtake rises, to what avail

At the same time Tuesday for now 13 weeks from the end of February when the last of the risk on assets proved growth, Oil inventories had been rising and despite their utilisation going up since earlier this week, record production of 30 MBPD  ( 1.5X US consumption) with 10 MBPD by OPEC and increased supplies by Saudis who still are the only ones outside WTI who can effectively supply seet light crude to US refineries, ensure that Oil prices will remain weak. Add to that is the weak economic data from bailed up Europe where NFP data for France ticked up just 1% and UK production though better off than the 2.6% contraction in March , was still down by 1% for April. Export based price inflation is holding for month and both import and export prices have hardly moved, down 0.1% and 0.3% from May of 2011. China increased its crude imports in May and renegotiated Iran contracts as ell to go back to 6 MBPD while Oil prices continue a free fall from the good supply available as OPEC does not agree to production cuts in the June meeting

US Import Prices for May were down a complete 1% over April repeating the run in April as Oil prices keep falling in May. US Wealth has come down by 25% in the last 5 years according to a Reuters report to barely $77,000 from 4110,000 and so the decrease in Card debt from $3800 to $2600 actually means the consumer is paying more of his income in card debt yet.   industrial production will pick up in May and June data as the Queen’s Jubilee weekend also gets over and Retail Sales in the US , this week reported on the ICSC same store sales (Goldman Sachs) stay under 3% instead of last year’s 5%

REuters insider ( Morning AM Report 8am ET)

WTI is expected to trade in the $75 – $105 range this year and that means Brent will likely trade till $90 and stay under $100 for the most part of the year. Copper is healthier in price trends as Chinese imports pick up and banks start lending helped by the NBFC lending encouraged by the government

The Treasury budget figures for May will likely be even healthier when reporting in the afternoon as April was a large magical surplus for the US Economy. 2011 deficit for May set the bar pretty low at $150 B and any deficit of $125 B or lesser ill bve accepted by market observers, so be prepared for a big beat on this number. The Dollar indices continue to trade close to all time highs of 83

India’s production data also seems to have bottomed out with May reporting a 0.1% uptick after a 3.5% contraction for April in Industrial production. the RBI is expected to deliver a rate cut at the policy meeting on the weekend. The Spanish in the meantime are not anywhere near the bottom yet, ith EUR 100 B bringing al the conditionalities the orld thought they were rid of and the $100B amount a 10% of its GDP not enough to save Spain either

 

 

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