Oil Remains Near 8-Month Low
Published on Tuesday, 05 June 2012 17:06 Written by Todd Shriber
As traders remain leery of what the next headline out of the Euro Zone will be, oil remains vulnerable to additional downside, though Tuesday’s action provided a second consecutive day of small gains. NYMEX-traded crude for July delivery added 31 cents to settle at $84.29 per barrel. In London, Brent crude lost a penny to close at $98.84 per barrel. Two days of meager gains have done little to put a dent in the 8% tumble endured last week by West Texas Intermediate.
Despite a modestly positive day for U.S. equities, the dollar gained steam once again as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) closed higher on the session. G7 policymakers held an emergency briefing today to discuss options for Europe’s sovereign debt debacle and that may have tempted traders into making some long bets on oil, but as is par for the course, no noteworthy policy emerged from the briefing.
In economic news, the Institute for Supply Management said its services index rose to 53.7 in May from 53.5 in April. Economists expected a May reading of 53.5. Readings above 50 indicate expansion. The ISM number was the first remotely decent U.S. data point in what feels like an eternity, but it clearly wasn’t enough to illicit significant upside in riskier assets on Tuesday.
Between Europe, a lull in the U.S. economy and concerns regarding a hard landing in China, oil demand remains slack, giving traders little reason to truly up the ante on substantial near-term upside for oil.
Amid that grim demand outlook, oil equities remain under pressure. Share of Exxon Mobil (NYSE: XOM) lost ground again today and rival Chevron (NYSE: CVX) incurred a small loss as well. Both stocks are down more than 8% in the past month, which worse than the performance of the Dow Jones Industrial Average over the same time.
Chesapeake Energy (NYSE: CHK), the second-largest U.S. natural gas company, added another 3% today and closed right at $17 on news the company will sell 338,000 in the oil-rich Utica Shale in Ohio. The sale is part of Chesapeake’s efforts to pare $9.5 billion in debt by the end of this year. Chesapeake isn’t likely to be short of interested parties for the Utica acreage, but the sale of some high potential assets may eventually concern investors.
BP (NYSE: BP) and Total (NYSE: TOT), Europe’s second- and third-largest oil companies, respectively, each added two-thirds of a percent on the day. Each has suffered double-digit losses in the past month.
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