About a quarter of the S&P 500 companies report, but the emphasis will be on what goes on in Washington. So far, nearly 20 percent of the S&P 500 has reported and 78 percent of those companies have beaten estimates, according to Thomson Reuters. Yet, stocks ignored the positives and sold off in the worst selling spree since the market bottomed in early March.
Obama's bank proposal, Bernanke's re-appointment, Portugal's budget presentation on Tuesday and any new tightening measure from China.
In particular markets could very volatile on Tuesday on Portugal's budget deficit and Bernanke's reappointment vote.
Monday: Australia PPI; German Gfk consumer sentiment; US existing home sales
Tuesday: BoJ rate decision; German Ifo business climate; UK Q4 GDP; US consumer confidence, house price index, Bernanke confirmation vote
Wednesday: Australia CPI; US new home sales, FOMC rate decision; RBNZ rate decision
Thursday: Eurozone confidence indicators; US durable goods
Friday: Japan CPI, unemployment rate; Eurozone M3, CPI; Swiss KOF; Canada GDP; US Q4 GDP
See Calendar
Sunday, January 24, 2010
Saturday, January 23, 2010
Weekly ActionForex (Jan 18-22): Scott Brown's Massachusetts win, Big Headache for Obama's Panic Driving On Wall Street.
Risk aversion was in the driving seat last week as investors rushed out from stocks and commodities on a couple of concerns: (a) President Obama's bank proposal to limit risk taking by banks and (b) doubt on Bernanke's future as Fed chairman in the second term(FT).
European stocks were dragged down by US equities, deteriorating investor sentiments as well as continuous concern on Greece's fiscal health and deficit contagion spreading to other European nations. Asian stocks were pressured by worry of further tightening measures by China (Blg) government to cool growth and inflation.
Dollar benefited from safe haven flow and rose sharply against most major currencies. However, the Japanese yen was indeed the biggest winner last week (Blg) and yen crosses were extremely heavy.
On Thursday, US President Barack Obama proposed restrictions on risk-taking at financial institutions. The plan includes limiting the size of financial institutions and to ban some 'risky' activities including proprietary trading and internal hedge funds. The news damped investments for risky assets such as commodities and equities (BW: Obama Tough Talk on Wall Street Flop).
On Friday, two Senate democrats said they would oppose Bernanke's second term (Blg) as Fed chairman and there are altogether five Senate Democrats in this position with eighteen others undecided. Bernanke needs 51 votes to be confirmed but hey may need 60 votes from Senate to overcome a procedural hurdle. However, it's doubtful whether Bernanke would get 60 votes when the current term expires on January 31. These two issues sent DOW -5.1% down from intraweek high of 10729.89 to close at 10172.98.
The ongoing concern on Greece's ability to cut down its fiscal deficit boosted interest in Portugal's 2010 budget plan this week. IMF warned Portugal last week of the "critical" importance of getting its public finances in order and said that "fiscal consolidation is critical to prevent further deterioration and preserve hard-won credibility." There were growing concern of contagion spreading from Greece to other nations in the Eurozone even though the prospect of Eurozone breakup is still very low.
Investors are also deeply concerned as German and Eurozone ZEW economic sentiments dropped much more than expected in January and triggered doubt on the sustainability of recovery in the region. Euro continued to weaken against Swiss Franc and dived to as low as 0.8650 against Sterling before recovering. The US president’s announcement of a crackdown on banks’ riskier activities, including speculative “proprietary” trading and investing in private equity and hedge funds, drew some words of support but no commitment to follow suit from Britain, France or Germany (Blg: European Banks affected by Obama's crackdown)
Asian stocks were pressured as China hiked one-year bill yield again and on speculation that that China will raise interest rates last Friday. While rates was not raised at the end, investors will continue to be cautious on any more tightening measures from China.
Looking at the charts, DOW's sharp reversal last week has sent the index deeply below the medium term trend line support as well as 55 days EMA. The break of 10218 key near term support level also confirms that a medium term top is in place at 10729.80 with bearish divergence condition in daily MACD and RSI. While it's still a bit early to say that the up trend from 6469.9 has completed totally, more downside should now be in favor in near term to bring the index through 10000 psychological towards 38.2% retracement of 6469.9 to 10729.98 at 9102.
Another point to note is that VIX, the fear index, rocketed higher last week to close at 27.31, having its biggest three day rise since February 2007. This could be another sign of market reversal.
Crude oil's fall from 89.35 extended further to close at 74.54 last week. While it's still early to suggest that medium term rise from 33.2 has finished. Some near term weakness is in favor to trend line support at around 70 psychological level.
Gold's fall from 1163 has also extended last week and closed below 1100 level at 1190.8. THe development indicates that correction from 1227.5 is set to resume for another low below 1075, and probably to projection level at 1010.7, which is close to 1000 psychological support.
The above developments will continue to favor more upside in both dollar and yen. Considering bearish outlook in USD/JPY, we'd expect yen to outperform the greenback though.
Side stories on Obama presidency, one year in the making (Politico: Arena, Opinion-shapers)
European stocks were dragged down by US equities, deteriorating investor sentiments as well as continuous concern on Greece's fiscal health and deficit contagion spreading to other European nations. Asian stocks were pressured by worry of further tightening measures by China (Blg) government to cool growth and inflation.
Dollar benefited from safe haven flow and rose sharply against most major currencies. However, the Japanese yen was indeed the biggest winner last week (Blg) and yen crosses were extremely heavy.
On Thursday, US President Barack Obama proposed restrictions on risk-taking at financial institutions. The plan includes limiting the size of financial institutions and to ban some 'risky' activities including proprietary trading and internal hedge funds. The news damped investments for risky assets such as commodities and equities (BW: Obama Tough Talk on Wall Street Flop).
On Friday, two Senate democrats said they would oppose Bernanke's second term (Blg) as Fed chairman and there are altogether five Senate Democrats in this position with eighteen others undecided. Bernanke needs 51 votes to be confirmed but hey may need 60 votes from Senate to overcome a procedural hurdle. However, it's doubtful whether Bernanke would get 60 votes when the current term expires on January 31. These two issues sent DOW -5.1% down from intraweek high of 10729.89 to close at 10172.98.
The ongoing concern on Greece's ability to cut down its fiscal deficit boosted interest in Portugal's 2010 budget plan this week. IMF warned Portugal last week of the "critical" importance of getting its public finances in order and said that "fiscal consolidation is critical to prevent further deterioration and preserve hard-won credibility." There were growing concern of contagion spreading from Greece to other nations in the Eurozone even though the prospect of Eurozone breakup is still very low.
Investors are also deeply concerned as German and Eurozone ZEW economic sentiments dropped much more than expected in January and triggered doubt on the sustainability of recovery in the region. Euro continued to weaken against Swiss Franc and dived to as low as 0.8650 against Sterling before recovering. The US president’s announcement of a crackdown on banks’ riskier activities, including speculative “proprietary” trading and investing in private equity and hedge funds, drew some words of support but no commitment to follow suit from Britain, France or Germany (Blg: European Banks affected by Obama's crackdown)
Asian stocks were pressured as China hiked one-year bill yield again and on speculation that that China will raise interest rates last Friday. While rates was not raised at the end, investors will continue to be cautious on any more tightening measures from China.
Looking at the charts, DOW's sharp reversal last week has sent the index deeply below the medium term trend line support as well as 55 days EMA. The break of 10218 key near term support level also confirms that a medium term top is in place at 10729.80 with bearish divergence condition in daily MACD and RSI. While it's still a bit early to say that the up trend from 6469.9 has completed totally, more downside should now be in favor in near term to bring the index through 10000 psychological towards 38.2% retracement of 6469.9 to 10729.98 at 9102.
Another point to note is that VIX, the fear index, rocketed higher last week to close at 27.31, having its biggest three day rise since February 2007. This could be another sign of market reversal.
Crude oil's fall from 89.35 extended further to close at 74.54 last week. While it's still early to suggest that medium term rise from 33.2 has finished. Some near term weakness is in favor to trend line support at around 70 psychological level.
Gold's fall from 1163 has also extended last week and closed below 1100 level at 1190.8. THe development indicates that correction from 1227.5 is set to resume for another low below 1075, and probably to projection level at 1010.7, which is close to 1000 psychological support.
The above developments will continue to favor more upside in both dollar and yen. Considering bearish outlook in USD/JPY, we'd expect yen to outperform the greenback though.
Side stories on Obama presidency, one year in the making (Politico: Arena, Opinion-shapers)
US Market Round-Up (Jan 18-22): Scott Brown's Win & aftereffect on Wall Street and Main Street
Well, there went the year's gains, lost in a maelstrom of selling linked to the following worries: (a) that the global economic engine known as China was about to reach for the brake handle, (b) that investors appear to have decided that the economic rebound -- which looked like it was well underway, and drove big stock gains last year - was not as strong or as certain as they once believed, (c) that Investors have also been disappointed in how earnings season is going, let down by a reality of stagnant revenue growth and poor profit gains that contrasts with high expectations, and (d) that of the sudden shift of political power in Washington.
- Would President Barack Obama's plans for reforming financial regulation hurt banks?
- Would the Democratic Party's unexpected loss of a seat in the U.S. Senate derail Obama's domestic agenda?
- What about Federal Reserve Chairman Ben Bernanke's chances for approval by the Senate?
There were so many things for investors to be unsure about this week. Their reaction? Sell.
Upset in the Bay State. In a stunning victory that complicates President Barack Obama's proposed overhaul of the U.S. health-care system, Republican Scott Brown won Tuesday's special Senate election in Massachusetts, defeating the state's Attorney General Martha Coakley to win the seat held by liberal icon Edward Kennedy for nearly 50 years. The win by Brown, a previously obscure state senator, ends the Democrats' 60-seat supermajority in the Senate and spells trouble for easy passage of a health-care bill. Read more about the Massachusetts special election .
Limits on big banks In his toughest response yet to the financial crisis, Obama proposed Thursday that strict limits be imposed on the size and trading activities of the nation's biggest banks. The proposal aims to deter commercial banks from becoming so large that they put the broader economy at risk and distort normal competitive forces. The president endorsed some recommendations by former Federal Reserve Chairman Paul Volcker, but didn't go as far as Volcker's urgings to break up the banks. Read more about Obama's bank proposal.
Goldman Sachs (GS) swung to a fourth-quarter profit that topped analyst estimates as lower-than-expected compensation levels boosted the bottom line, while performance at its various businesses was mostly in line with expectations. The Wall Street firm, which has faced public anger over recording big profits after accepting bailout funds, said total compensation and benefits have decreased by 20% since 2007. Read more about Goldman's results .
Growth worries at Google Shares of Google slipped late in the week as investors reacted to the Internet giant's fourth-quarter financial results, which gave some cause for concern about the company's growth prospects. Although its earnings generally fell in line with Wall Street estimates, they didn't quite outperform higher "whisper" numbers. Read more about reaction to Google's report .
A sweet deal after months of wrangling, Kraft Foods (KFT) lifted its offer for Cadbury PLC (CBY)(UK:CBRY) to around 11.9 billion pounds ($19.5 billion) in a bid that won approval from its British target. The agreement follows a four-month war of words between the companies' executives. The acquisition of the 186-year-old Cadbury will make Kraft the world's biggest chocolate and confectionery producer by revenue and the No. 2 gum producer behind privately-held Mars Inc. Read more about Kraft's deal for Cadbury .
Rehab for Japan Airlines as Japan Airlines Corp. filed for court-led rehabilitation, the Japanese equivalent of a Chapter 11 bankruptcy, which will allow the carrier to operate as it undergoes restructuring. The Tokyo-based carrier, Asia's second largest in terms of annual customers and destinations, is also at the center of showdown between U.S. carriers Delta Air Lines (DAL) and American Airlines (AMR), rivals that both want tighter relations to better tap into fast-growing markets on the continent. Read more about the troubles at JAL .
Another tough year for builders
The International Builders' Show went on this week without its signature exhibit: The New American Home, which for years has served as a showcase for some of the latest trends in building, design and home products. The private lender financing the project ran into credit problems and had to withdraw funding, according to the show's Web site. It's a fitting development and a familiar story for an industry that has been so battered during this housing downturn. Read more about the builders' show .
China's Credit Growth Control: Case Study
Wen Signals Concern About Stimulus Risks (AWSJ)
Bank Of China Ltd. has ordered its credit officials to halt any new yuan loans due to overly fast lending growth so far in January. The headquarters of the state-controlled lender has issued a notice to all of its branches (a) to stop issuing new yuan loans, and also (b) to curb foreign-currency denominated new loans, (c) any new loans, if they were to be extended, would have to be approved by the bank's headquarters, the person said.
In a statement, Bank of China said its new loans in the first 20 days of January has been high and that it will take a closer look at its lending, though it didn't say whether it had suspended lending.
Banking shares in Shanghai and Hong Kong fell on renewed concerns over lending supply after a Chinese media report that the China Banking Regulatory Commission has asked several commercial banks to stop issuing new loans in the remaining days of January.
In early trading in Shanghai, China Construction Bank fell 1%, China Merchants Bank was down 1.3% and Bank of China lost 0.7%. In Hong Kong, China Construction Bank was 1.9% lower, ICBC was down 1.3% and Bank of China was off 2.0%. The Shanghai Composite Index was 1.0% lower and Hong Kong's Hang Seng Index fell 1.4%. Spillover effect was all over Asia bourses and US/Europe markets (Blg).
Mr. Liu said he expects China's new yuan bank loans to fall to around 7.5 trillion yuan this year from 9.59 trillion yuan in 2009, and outstanding yuan loans to rise 16%-18% this year, down significantly from a 31.7% increase in 2009.
Widespread concerns that fast growth in credit last year may lead to an asset bubble have led to calls for the authorities to rein in lending.
Beijing's stance on monetary policy has been gradually hardening over the last week as it prepares to gradually wean the country off the massive stimulus lending that has supported the economy over the last 12 months. So far it has taken fairly moderate actions:
Bank Of China Ltd. has ordered its credit officials to halt any new yuan loans due to overly fast lending growth so far in January. The headquarters of the state-controlled lender has issued a notice to all of its branches (a) to stop issuing new yuan loans, and also (b) to curb foreign-currency denominated new loans, (c) any new loans, if they were to be extended, would have to be approved by the bank's headquarters, the person said.
In a statement, Bank of China said its new loans in the first 20 days of January has been high and that it will take a closer look at its lending, though it didn't say whether it had suspended lending.
Banking shares in Shanghai and Hong Kong fell on renewed concerns over lending supply after a Chinese media report that the China Banking Regulatory Commission has asked several commercial banks to stop issuing new loans in the remaining days of January.
In early trading in Shanghai, China Construction Bank fell 1%, China Merchants Bank was down 1.3% and Bank of China lost 0.7%. In Hong Kong, China Construction Bank was 1.9% lower, ICBC was down 1.3% and Bank of China was off 2.0%. The Shanghai Composite Index was 1.0% lower and Hong Kong's Hang Seng Index fell 1.4%. Spillover effect was all over Asia bourses and US/Europe markets (Blg).
Mr. Liu said he expects China's new yuan bank loans to fall to around 7.5 trillion yuan this year from 9.59 trillion yuan in 2009, and outstanding yuan loans to rise 16%-18% this year, down significantly from a 31.7% increase in 2009.
Widespread concerns that fast growth in credit last year may lead to an asset bubble have led to calls for the authorities to rein in lending.
Beijing's stance on monetary policy has been gradually hardening over the last week as it prepares to gradually wean the country off the massive stimulus lending that has supported the economy over the last 12 months. So far it has taken fairly moderate actions:
- guiding up the interest rate on government bills,
- increasing the amount of reserves banks must hold at the central bank, which will decrease the amount banks can lend,
- taking aim at the quality of loans being made, saying Monday that banks will be required to base their lending on real demand and properly manage the pace and quality of lending. That follows signs of lending at a breakneck pace in the first few weeks of the year, when banks traditionally ramp up lending. A local media report earlier this moth said new loans in the first week of the year grew by 600 billion yuan, a massive figure. In all of December, new yuan loans were 379.8 billion yuan.
- The CBRC also said Monday it will closely watch changes in the property market and will strengthen its supervision and window guidance of related loans in 2010.
Look at past China's tighening: policy-announcement and then policy-execution and follow-up
Citigroup Q4 2009 Earnings: How Bad is the Loss in Q4, and How Exactly Citigroup is Doing??
Jan. 19 (Bloomberg) -- The bank that is 27 percent owned by the Treasury Department, posted a $7.6 billion Q4 loss on costs to exit the U.S. bailout program, giving the company its second straight unprofitable year.
- The loss of 33 cents a share was narrower than the record loss of $17.3 billion, or $3.40 a share, in the same period of 2008.
- Expectation was to lose 30 cents a share, the average estimate of 18 analysts surveyed by Bloomberg.
- Chief Executive Officer Vikram Pandit had to book an $8 billion pretax charge when he repaid $20 billion of bailout funds in December to avoid being left behind by rival banks that exited the Troubled Asset Relief Program.
- Revenue missed analysts’ estimates as trading results declined from the third quarter.
Citigroup rose 12 cents, or 3.5 percent, to $3.54 in composite trading on the New York Stock Exchange at 4:15 p.m. That compares with $34.77 on Dec. 10, 2007, the last closing price before Pandit was named to the top post.
Not counting the repayment of funds to the U.S. government, the fourth-quarter loss was $1.4 billion, or 6 cents a share.
Citigroup’s loss contrasts with results at New York-based JPMorgan Chase & Co., which said last week that profit more than quadrupled from a year earlier to $3.28 billion as investment- banking fees climbed.
Citigroup’s revenue fell 4.3 percent to $5.41 billion in the fourth quarter, the company said. Managed revenue excluding the costs of the TARP repayment was $17.9 billion. Analysts expected the bank to report revenue of $19.4 billion, according to the average of nine estimates.
Revenue Trend
For the full year, Citigroup’s loss was $1.6 billion, or 80 cents a share.
Citi Holdings, the collection of businesses tagged for disposal, had a $2.44 billion loss in the fourth quarter. Citi Holdings assets declined $70 billion to $547 billion during the quarter.
Citicorp, the division of businesses that Pandit plans to keep, had a $1.73 billion profit in the fourth quarter, compared with a $5.52 billion loss a year earlier.
Citigroup said in a presentation on its Web site that it plans to move $61 billion of assets from Citi Holdings to Citicorp in the first quarter, including $34 billion of North American mortgages.
- Net credit losses were $7.13 billion, down from $7.97 billion last quarter. Citigroup Chief Financial Officer John Gerspach said he expects a “modest increase” in credit losses in the first quarter before they fall in the second quarter.
- Non-performing loans fell 2 percent from the third quarter to $32 billion, the first sequential decline since early 2006.
- Full-year compensation fell by 20 percent to $25 billion.
- Revenue from trading and investment-banking climbed 5.9 percent from a year earlier to $5.4 billion. Those figures exclude “credit value adjustments” of $1.9 billion, or losses required under U.S. accounting rules to reflect an increase in the market value of its own liabilities. The CVA for the fourth quarter included an $840 million pretax loss to correct for an error made in the way Citigroup calculated its CVAs in prior periods, the bank said in today’s statement.
Consumer-banking revenue rose 0.2 percent to $5.72 billion, and revenue in the global transaction services unit was $2.48 billion. Local consumer lending, which includes the CitiFinancial personal-loans unit, had a $2.33 billion loss from continuing operations, narrower than the $4.89 billion loss a year earlier.
Citigroup is forecast to earn 9 cents a share this year, or 2 percent of what it made in 2005, based on Bloomberg’s analyst survey. That’s partly because Citigroup has had to issue almost 23 billion new shares to bolster a weakened capital base. Investors who were shareholders prior to the financial crisis were left with about one-fifth their original stakes.
Pandit sold $20 billion of shares to new investors last month to help repay the bailout funds, a move aimed partly to extract the company from executive-pay restrictions that threatened to drive away top-producing traders and investment- bankers. The government, which initially said it would sell as much as $5 billion of its shares in the offering, later scrapped the plan because the price was too low.
Wall Street Diary (Jan 22): Earnings Results Exceed Expectation but Selling Pressure Exceeds Market Support
Not only did Friday mark the stock market's third straight loss, but it also marked its worst single-session percentage drop in more than two months. The recent string of losses has been underscored by a sell-the-news mentality among investors. Dow dropped more than 200 points for the 2nd straight session!
Tech stocks were dropped for a 3.9% loss by participants who have argued that the heady gains seen by the sector in previous months meant that positive news had already priced into stocks.
As a result, better-than-expected earnings from Google (GOOG 550.01, -32.97) and Advanced Micro Devices (AMD 7.88, -1.11) were met with stiff selling pressure (also IBM ). Google's weakness imbued fellow large-caps in the Nasdaq 100, which fell 3.0% this session, while AMD dragged down the Philadelphia Semiconductor Index to a 5.3% loss.
Consumer finance stocks fell 9.3% as participants took a closer look into (again, in spite of)better-than-expected earnings from Capital One Financial (COF 37.53, -5.17) and American Express (AXP 38.59, -3.57). Remember, Goldman Sach had a blow-out earnings reported earlier in the week.
Though they were able to string together gains in the face of broader market pressure during the previous two sessions, regional banks were sent to a 2.3% loss amid a batch of mixed earnings reports. Overall weakness among financial issues sent the sector to a 3.3% loss.
Both General Electric (GE 16.11, +0.09) and McDonald's (MCD 63.39, +0.19) exceeded earnings expectations for the latest quarter (again!)and showed early strength, but their gains faded into the close. They were part of a handful of blue chips to book gains. More on GE from Bloomberg
Broad-based weakness during the past few sessions resulted in the stock market's worst weekly performance since late October and caused stocks to close the week below their 50-day moving average for the first time since early November.
Volatility surged for the second straight session. A 25% spike on top of the previous session's 19.2% run up resulted in the worst two-session rise for the Volatility Index, or VIX, in more than one year. It also caused the VIX to close above both its 50-day moving average and its 200-day moving average for the first time since March 2008.
Trading volume was strong once again as roughly 1.5 billion shares exchanged hands on the NYSE. That put trading volume on the big board above its 50-day moving average and its 200-day moving average for the second session in a row.
U.S. dollar has retreated to a loss of 0.3% against a basket of foreign currencies.
Financial issues have come to seek direction as analysts assess the possible repercussions of President Obama's proposal to limit risk-taking by banks (including a massive 1,000 points correction?)
Many overseas banks are lower in sympathy to the losses incurred by domestic banks after President Obama announced plans to curb certain hedge fund-related activities at U.S. banks.
Tech stocks were dropped for a 3.9% loss by participants who have argued that the heady gains seen by the sector in previous months meant that positive news had already priced into stocks.
As a result, better-than-expected earnings from Google (GOOG 550.01, -32.97) and Advanced Micro Devices (AMD 7.88, -1.11) were met with stiff selling pressure (also IBM ). Google's weakness imbued fellow large-caps in the Nasdaq 100, which fell 3.0% this session, while AMD dragged down the Philadelphia Semiconductor Index to a 5.3% loss.
Consumer finance stocks fell 9.3% as participants took a closer look into (again, in spite of)better-than-expected earnings from Capital One Financial (COF 37.53, -5.17) and American Express (AXP 38.59, -3.57). Remember, Goldman Sach had a blow-out earnings reported earlier in the week.
Though they were able to string together gains in the face of broader market pressure during the previous two sessions, regional banks were sent to a 2.3% loss amid a batch of mixed earnings reports. Overall weakness among financial issues sent the sector to a 3.3% loss.
Both General Electric (GE 16.11, +0.09) and McDonald's (MCD 63.39, +0.19) exceeded earnings expectations for the latest quarter (again!)and showed early strength, but their gains faded into the close. They were part of a handful of blue chips to book gains. More on GE from Bloomberg
Broad-based weakness during the past few sessions resulted in the stock market's worst weekly performance since late October and caused stocks to close the week below their 50-day moving average for the first time since early November.
Volatility surged for the second straight session. A 25% spike on top of the previous session's 19.2% run up resulted in the worst two-session rise for the Volatility Index, or VIX, in more than one year. It also caused the VIX to close above both its 50-day moving average and its 200-day moving average for the first time since March 2008.
Trading volume was strong once again as roughly 1.5 billion shares exchanged hands on the NYSE. That put trading volume on the big board above its 50-day moving average and its 200-day moving average for the second session in a row.
U.S. dollar has retreated to a loss of 0.3% against a basket of foreign currencies.
Financial issues have come to seek direction as analysts assess the possible repercussions of President Obama's proposal to limit risk-taking by banks (including a massive 1,000 points correction?)
Many overseas banks are lower in sympathy to the losses incurred by domestic banks after President Obama announced plans to curb certain hedge fund-related activities at U.S. banks.
Sunday, January 17, 2010
Energy Capital (Jan 11-15)
On Tuesday, the Energy Information Administration released their Short-Term Energy Outlook:
- oil market is expected to gradually tighten over the next two years, assuming an economic recovery continues,
- world oil demand is projected to grow by 1.1 million barrels per day this year, followed by a 1.5 million barrel per day increase in 2011. It should come as no surprise that China's leading the charge,
- higher production in the U.S., Brazil, and the former Soviet Union are the biggest factors in non-OPEC supply growth.
- Although oil prices in 2010 are expected to range between $60 and $100 per barrel, the $80/bbl mark is seen as the "comfort zone" for most analysts. Whenever oil falls below $70 per barrel, we're in danger of losing crucial investments needed for future supply. On the flip side, producers need to be wary of public outrage whenever we see triple-digit oil prices.
Take Oilman T. Boone Pickens, for example. He is one of the few people out there that actually has a plan to face the upcoming energy crisis. This week, that plan changed gears when the billionaire announced that he has halved his order for wind turbines from GE, postponing his plans for a Texas wind farm. The 300 turbines he does receive will be sent to projects in Minnesota. This means that Pickens will be focusing his attention on a campaign to convert trucks to natural gas.
With coal prices already at a 14-month high, get ready for even higher prices. We can thank China for the boost. China, the world's largest coal consumer, might be forced to shut 11% of its power generators due to coal shortages.
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