Stubborn Oil Price Keeps Market in Check

123jump.com Staff
08 Sep, 2005
New York City

After trading for the most of the day in negative zone, all three averages closed lower. The market got its first glimpse of the decline in crude oil, gasoline and distillate inventories. The smaller-than-expected decline in inventories led oil to drop initially only to rebound as sellers were few. Hovnanian forecasted lower profit in 2006 driving home builder segment lower and Sears Holdings reported earnings below the consensus forecast.

U.S. MARKET AVERAGES

The market remained under pressure after two days of gain, and at the opening had to digest unemployment claims, wholesale inventories, and weekly petroleum report.

Weekly initial unemployment claims fell by one thousand for the week ending Sept 3 according to Labor Department. The seasonally adjusted claims level of 319,000 was expected to be hit by at least 10,000 claims from the claims in three Gulf States.

The energy sector sharply declined when the first statistics of Hurricane Katrina’s impact was released to show that crude oil inventories have significantly dropped in the last few weeks. Gasoline stocks have also declined. However the first gauge on oil production and inventory level after Katrina revealed that 6.4 million barrels of crude oil was released less than expected and refineries operated at 86.8% capacity below the traditional 93% capacity.

The Housing and retail stocks have remained in the negative territory. Internet stocks registered modest losses with eBay down 3.8%.
The leading gainer among the sectors is the gold sector, although it has declined from intraday highs and was recently up 1.4%.

HMO and airline stocks slightly gained. Chip stocks Texas Instruments and Broadcom moved up ahead of Intel’s mid-quarter upgrade and earnings report from National Semiconductor. Apple was heading for a new peak on a new product release.

MOVERS AND SHAKERS

Northwest Airlines Corp. advanced 5.9% in pre-market dealings as a result of rising hopes that the company may solve the problems with its striking mechanics.

eBay Inc was down 2.7% in pre-market trading because of the rumors that it intents to buy Internet phone service Skype Technologies SA.

News Corp. rose 0.64% after the company said it acquires IGN Entertainment Inc. for about $650 million.

Ford Motor Co. is expected to announce the sale of its Hertz Corp. unit to a group of corporate buyout firms. The company rose 1.4% in pre-market trading.

Sears Holdings lost 3.6% as it announced a 4.4% decline in same-store sales for the second quarter.

Coca-Cola Enterprises Inc. was down 3.9% in pre-market dealings after it said third-quarter earnings won't reach analysts’ estimates of 51 cents per share.

National Semiconductor ((NSM)) was up 6% after the company reported first quarter earnings of 24 cents better than the forecast of 21 cents.


ECONOMIC NEWS

The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 6.4 million barrels for the week ended September 2, falling to 315.0 million barrels from the 321.4 million barrels recorded in the previous week. This followed a decline of 1.5 million barrels for the prior week. Even with the recent declines, oil inventories are still 13.1% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 4.3 million barrels, adding to a recent streak of draw downs. Gasoline stocks are now 8.6% below their level of last year. Inventories of distillate fuel oil fell by 800,000 barrels in the most recent week.

On the data front, first-time claims for state unemployment benefits fell by 1,000 to 319,000 last week, the Labor Department estimated. The four-week average of new claims rose by 2,000 to 318,500, the highest in seven weeks. The figures include about 10,000 claims related to Hurricane Katrina, a Labor Department spokesman said, adding that upward revisions to last week's data are possible.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed on declining crude-oil prices to a three-week low. The Nikkei shed 0.56% as investors sold steel, bank and real estate issues, the central bank said that it would keep monetary policy and national elections approached. Across the region Hong Kong’s Hang Seng lost0.38%, while South Korea’s Kospi reached a record high, rising 0.2% on interest-rate hikes speculations. The dollar bought 110.40 yen.

European markets finished the trading session mixed on weak U.S. stocks and mixed earnings reports, including declining building-materials maker Lafrage and gaining luxury retailer PPR. The German DAX 30 added 0.09%, the French CAC 40 lost 0.45%, and London’s FTSE 100 slipped 0.47%.

ENERGY, METALS, CURRENCIES

Crude oil prices started rising ahead of U.S. data, expected to show a sharp decline in crude and product stocks. Light sweet crude after trading up and down and then up, settled up 12 cents to $64.49 a barrel. London Brent climbed 65 cents to $63.54.

To read Weekly Petroleum Report, please click here.