They say beauty is in the eye of the beholder. Apparently so are US oil stockpiles. Yesterday America’s two highest-profile energy agencies released their estimates of inventory levels for last week; with very different views.
The Energy Department said that stockpiles declined by 3.1 million barrels in the week ended June 3. The American Petroleum Institute, however, begged to differ, reporting that inventories fell by a whopping 13.8 million barrels.
The news initially caused oil to surge above $55 before traders stopped to consider the validity of the numbers. As IFR markets senior energy analyst Tim Evans explained to Marketwatch: "A drop of this magnitude simply does not make sense, yet the API apparently lacks the ability to screen their estimates for nonsense." Economy.com analysts agreed, calling the number “implausibly large.”
The froth was thus blown off the price. Traders even downplayed the importance of the more-reasonable Energy Department numbers, saying that the decline was probably a result of refiners reducing working stocks, or increased consumption over the Memorial Day holiday but did not indicate a lack of availability of oil. Crude promptly fell as low $52.40 before recovering slightly to a current $52.70.
Even as the price fell, there were bullish words from US Energy Secretary Sam Bodman. Bodman told Reuters that it will take at least five years for the oil industry to boost production enough to catch up with rising world demand, and bring down prices. He speculated that prices could remain above $50 through 2006.
One price that is falling is the yen-denominated cost for gold. With the Japanese currency having appreciated significantly against both the dollar and euro, Bloomberg reported that buyers in the country have upped their purchases of the now-cheaper yellow metal. Such buying has helped stabilize the gold price overnight after it fell $2 late in New York to close at $424/oz. Intra-day, it had traded as high as $426. Currently, it’s going for $423.70. Silver also spiked midday, to near $7.50/oz, before shedding just under 10 cents to a current $7.40/oz. (Click here for charts)
Base metals showed a similar pattern, rising in early trading but then giving back most of the gains prior to close. Copper initially added 1.5 cents to as high as $1.555/lb before settling back to a current $1.5367/lb. Likewise with zinc and lead, which each added roughly half a cent but then immediately lost it, to currently sit at $0.5901/lb and $0.4513/lb, respectively. Nickel also gained and lost 10 cents, but has recovered overnight to a current $7.6733/lb. Aluminum bucked the trend by heading straight downward by more than 1 cent to a current $0.7785/lb.
The euro is also dropping and apparently EU officials are fine with it. Yesterday, European Central Bank council member Axel Weber said that the common currency’s 10% fall against the dollar this year is perfectly acceptable. At the same time, the International Monetary Fund’s European director Michael Deppler said that the euro’s current level is “about right” and could actually benefit the EU by increasing demand for exports.
The news prompted the euro to slide further against the buck, currently trading at $1.2213. (Click here for currency prices) Marketwatch reported that the greenback was also boosted by increased hedge fund buying. The gains may be limited, however, as it’s expected that Fed Chairman Alan Greenspan may today suggest in a speech to Congress that the US economy is slowing.
