Stocks surged Wednesday, with financial issues leading the way, after reports about the government’s "stress tests" suggested that the major banks are better capitalized than some had thought.
Also helping: jobs reports that suggested the pace of the slowdown is easing.
The Dow Jones industrial average (INDU) gained 102 points, or 1.2%. The S&P 500 (SPX) index climbed 16 points, or 1.7%. The Nasdaq composite (COMP) rose 5 points, or 0.3%.
The major stock gauges had seesawed through the early afternoon, but staged a rally through the close after reports about the stress tests surfaced.
Bank shares led the charge even on reports that major companies such as Bank of America and Citigroup will need to raise billions more to meet the requirements of the regulators conducting so-called stress tests.
But investors were perhaps relieved that the companies didn’t need to raise even more, said Tom Hepner, financial adviser at Ruggie Wealth Management.
Stocks drifted lower Tuesday as investors retreated after a roughly 8-week advance that boosted the S&P 500 by 34%. The rally followed a rout that left the index at a more than 12-year low.
Since then, investors have been moving back into the market on indications that the economy is starting to find its footing. Wednesday’s two job market reports continued that trend.
"There are indications that the rate of decline is slowing and that has made investors a bit more optimistic," Hepner said. "They’re taking an almost ho-hum response to bad news."
After the close, Cisco Systems (CSCO, Fortune 500) reported quarterly sales and earnings that fell from a year ago but still topped estimates.
Reports are due before the start of trading Thursday on first-quarter productivity, first quarter unit labor costs and weekly jobless claims. A report on March consumer credit is due in the afternoon.
Stress tests: Investors were sorting through published reports on the health of the nation’s banking system ahead of the government’s official release of the stress test results Thursday.
The government is testing to see that the 19 biggest banks have enough money on hand to withstand a potential bigger downturn in the economy. More than half the banks may have to raise additional capital, according to reports this week.
Bank of America (BAC, Fortune 500) may need to raise an additional $34 billion in order to meet the regulators’ standard. Wells Fargo (WFC, Fortune 500) may need around $15 billion, according to published reports Thursday. Dow component Citigroup (C, Fortune 500) may need at least another $10 billion.
JPMorgan Chase (JPM, Fortune 500), American Express (AXP, Fortune 500) and Bank of New York Mellon (BK, Fortune 500) won’t need any additional capital, according to the reports.
All the bank stocks mentioned rallied, along with regional banks. Fifth Third Bancorp (FITB, Fortune 500) added 15.5% and was one of the Nasdaq’s big gainers.
The KBW Bank (BKX) sector index gained 11.5%.
Employment: A pair of reports released before the open showed that the pace of unemployment is starting to slow.
Employers in the private sector pared 491,000 jobs from their payrolls in April, after cutting 708,000 jobs in March, according to payroll services firm ADP credit scores. Economists surveyed by Briefing.com expected a decline of 645,000.
The number of job cuts announced in April decreased for the third month in a row, according to outplacement firm Challenger, Gray & Christmas Inc. U.S. employers announced 132,590 cuts in April, the lowest number since October, but still 47% more than in the same month a year ago.
The reports raised bets that Friday’s bigger non-farm payrolls report from the government will show a slower pace of job losses too. Employers are expected to have cut 620,000 jobs from their payrolls after cutting 663,000 in March. The unemployment rate, generated by a separate survey, is expected to have risen to 8.9% from 8.5% in March.
Autos: General Motors (GM, Fortune 500) shares slumped ahead of its quarterly report, due out Thursday. The troubled U.S. automaker, facing a potential bankruptcy filing, is expected to post a steep quarterly loss.
Last week rival Chrysler filed for bankruptcy, after failing to win enough concessions from its lenders.
Ford Motor (F, Fortune 500) - the only Detroit automaker that has not taken government loans - said its restructuring is on track and that it has enough money to fund its plan. The company also said it will spend $550 million to convert a plant that produced trucks and SUVs into a complex for making fuel-efficient and battery-powered cars.
Corporate news: Walt Disney (DIS, Fortune 500) issued quarterly results late Tuesday. The Dow component reported weaker earnings that topped estimates on weaker revenue that missed estimates. Shares jumped nearly 12% Wednesday.
A rally in oil prices gave a boost to big oil services stocks Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), ConocoPhilips (COP, Fortune 500) and Schlumberger (SLB).
Among decliners, Wal-Mart Stores (WMT, Fortune 500) and other retailers declined. Thursday brings April sales from the nation’s retailers.
Market breadth was positive. On the New York Stock Exchange, winners topped losers seven to three on volume of 1.88 billion shares. On the Nasdaq, advancers topped decliners five to four on volume of 3.02 billion shares.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.13% from 3.15% Tuesday. Treasury prices and yields move in opposite directions.
Borrowing costs continued to improve. The 3-month Libor rate fell to an all-time low of 0.97% from 0.99% Tuesday, according to Bloomberg.com. The overnight Libor held steady at 0.24%. Libor is a bank lending rate.
Other markets: In global trading, most Asian markets ended higher. Japanese markets have been closed all week for a holiday. European markets ended higher.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for June delivery rose $2.50 to settle at $56.34 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $7.20 to settle at $911.50 an ounce.
UBS remained wary on its immediate outlook as it braced for the full impact of the recession after confirming it had posted a first quarter loss on yet more writedowns and client withdrawals.
Despite a strong rebound in stock markets in recent weeks, UBS (UBS) said the global economy has continued to deteriorate and its home market Switzerland will not be spared. The Swiss economy is set to contract by up to 3% this year.
"The markets continue to be unsettled, and we remain cautious on the immediate outlook for UBS," the world’s largest wealth manager said in a statement.
The loss contrasts with competitor Credit Suisse’s (CS) first-quarter profit of 2 billion Swiss francs and gains by European rivals such as Deutsche Bank (DB) and Barclays (BCS).
Risky investments by UBS’s investment bank in complex U.S. financial products have forced it to make more than $50 billion in writedowns and turned to the Swiss government for help.
UBS, which still holds billions of dollars of illiquid assets despite transferring many of those to the Swiss central bank, indicated credit-related provisions would rise in the coming quarters and said the teetering economy was starting to impact on loans to small firms.
"The Swiss economy is slowing down and there is a lag effect for banks that has yet to make itself visible," UBS Chief Financial Officer John Cryan told a conference call.
Shares were up 4.6% at 16.42 Swiss francs at 0802 GMT, outperforming the DJ Stoxx European banking sector, in what traders saw as some short-covering after the stock fell the previous day.
Outlook still cloudy
The bank confirmed it had made a first quarter net loss of $1.76 billion as announced by new Chief Executive Oswald Gruebel on April 15.
Gruebel said the same day that the bank was still facing an uncertain future and announced 8,700 job cuts.
"There is some good news, including the outflows in private banking, which are less worse than what could have been expected," said analyst Sebastien Lemaire at Natixis Securities.
"But the environment is still very cloudy for UBS in terms of mark-downs in the coming quarters, in terms of cost of risks for the investment bank and now they are talking about some accounting errors same day cash advances."
UBS said it restated its 2008 accounts to correct accounting errors that raised the full-year loss, already the biggest in Swiss corporate history, by a further 405 million francs.
UBS said client withdrawals at its core wealth management and Swiss bank unit slowed to 23.4 billion francs in the quarter while its wealth management Americas business saw inflows of 16.2 billion francs, in line with what it announced in April.
Cryan said news on a U.S. tax fraud probe into UBS had prompted wealthy clients to withdraw money, in particular after UBS announced in February it had paid a large fine to avoid criminal charges. But he said that outflows had been slowing down now that there were fewer headlines on the case.
The global asset management business saw net new money outflows slowing to 7.7 billion francs.
UBS was also hit by a goodwill impairment of 631 million francs from the sale of Brazilian unit Pactual and severance costs of 184 million francs. It expects about 650 million of restructuring and severance charges in the second quarter.
UBS, which is struggling to curb it large balance sheet, said it had further reduced risks on the first quarter, bringing total risk-weighted assets to 277.7 billion francs.
Its Tier 1 ratio, a key measure of financial strength, was 10.5% at the end of the quarter, but would have been 11% if the effects of the Pactual sale had been included.
Cryan said UBS would consider selling small, non-core areas of business to boost its Tier 1, but not entire divisions.
While Credit Suisse’s Tier 1 ratio was 14.1% at the end of the first quarter, Cryan said UBS’s capital position was still strong compared with many rivals.
About 10 of the 19 largest U.S. banks being stress tested will be instructed by regulators to raise more capital, a source familiar with official talks said on Tuesday.
GlaxoSmithKline Plc, the world’s second-largest drugmaker, has agreed to buy privately owned U.S. skincare specialist Stiefel Laboratories for up to $3.6 billion, the two companies said on Monday.
The acquisition is the latest in a string of deals in the drugs sector, but is significantly smaller than recent mega-mergers, reflecting British-based Glaxo’s (GSK) declared focus on bolt-on buys to diversify its business.
Stiefel, part-owned by buyout firm Blackstone Group (BX), is the world’s largest independent dermatology company, with a range of prescription and over-the-counter products faxless payday loans.
It was put up for sale a month ago and attracted interest from a number of large pharmaceutical companies, including Novartis AG (NVS), Sanofi-Aventis SA (SNY) and Johnson & Johnson (JNJ, Fortune 500), according to people familiar with the matter.
The 160-year-old Stiefel is a maker of anti-itch creams, acne treatments and other skin treatments.
Japan’s Prime Minister Taro Aso wants his new economic stimulus to exceed 2 percent of gross domestic product, an indication the package will be his largest since taking office in September.
Aso ordered “spending to exceed 2 percent of GDP,” or 10 trillion yen ($100 billion), Finance Minister Kaoru Yosano told reporters in Tokyo today after meeting with the premier. The government aims to compile an outline of the measures by April 10, Yosano said.
The government is trying to revive an economy that’s heading for its worst recession since 1945 as a collapse in exports forces companies to fire workers and cut production. Group of 20 leaders last week pledged to spur growth amid signs that the global economy is beginning to recover from its worst financial crisis since the Great Depression.
“We’re seeing some bright signs but they’re not enough to bring forward the timing of a recovery,” Fujio Mitarai, chairman of the Japan Business Federation, said in Tokyo today. “We applaud efforts to beef up stimulus measures.”
While the Nikkei 225 Stock Average’s 17 percent advance since February and a weaker yen have provided some relief, data last week showed business sentiment plunged to a record low and the unemployment rate rose to a three-year high.
Yosano said the spending will focus on the job market, providing credit to companies, energy-efficient technology and welfare health insurance plans. Aso has unveiled two packages totaling 10 trillion yen.
Limited Room
Japan has limited room to spend more to revive growth, with its public debt burden likely to surge to 197.3 percent of GDP next year, the Organization for Economic Cooperation and Development said last week. The world’s second-largest economy will shrink 6.6 percent in 2009, the most since 1945 and steeper than declines of 4.1 percent in the euro area and 4 percent in the U.S., the OECD forecasts.
The International Monetary Fund recommends that stimulus spending be equivalent to at least 2 percent of a nation’s economy.
Vice Finance Minister Kazuyuki Sugimoto, the ministry’s top bureaucrat, said the funding for the measures will be decided after the package is announced. He said the government hasn’t decided whether the spending will be for this year or spread over several years.
The Finance Ministry today said loans from the state-owned Development Bank of Japan and Shoko Chukin Bank Ltd. to medium- to large-sized companies had reached about 1.3 trillion yen since December, according to a Kyodo News report.
Intel is seeking permission from its shareholders to revalue worthless employee stock options, a controversial move that the world’s biggest chipmaker says is needed to retain critical staff.
Under the plan, Intel would exchange underwater stock options — whose exercise prices are above the current stock price — for new options at current market prices. The offer would be open to all employees excluding senior executives.
While the move might offer incentive to hard-working employees, it could face opposition from some shareholders who are not being similarly compensated. Other technology companies that have taken similar actions include Google, eBay and Advanced Micro Devices.
Still, having cut some 20,000 jobs since 2006, Intel said it cannot afford to lose staff crucial to certain projects.
“Many of our employees are engineers, scientists, and other specialists who are working on important multiyear research and development projects or have skills that they have developed over the years and would be difficult to replace,” Intel said in a filing of its proxy statement with the U.S. Securities and Exchange Commission on Monday.
Intel said the plan should be cost-neutral since it had accounted for the cost of the options when they were granted.
Chairman Craig Barrett told Reuters he anticipates Intel shareholders will see the big picture, and the value of retaining key employees, particularly in troubled economic times no fax payday loan.
“I don’t think there’ll be shareholder backlash,” he said in an interview on the sidelines of a panel on wireless technology’s role in health care in Washington D.C.
Intel shares were up 4 percent in early afternoon trading on Monday, riding a bullish wave in broader markets.
So far, shareholders do not appear to be troubled by the plan, since they have more important strategic concerns including the status of microprocessor demand and the health of the personal computer market, according to Stifel Nicolaus analyst Cody Acree.
“As far as the lists of concerns, the stock option re-pricing falls fairly far down the list,” he said.
Intel also said it planned to freeze top executive salaries and reduce contributions to its employee retirement savings plan and employee stock purchase plans — which together should lead to significant cost savings in 2009.
In 2008, Intel Chief Executive Paul Otellini earned $12.1 million in total compensation, including $4.8 million in cash.
99 PCT OF EMPLOYEE OPTIONS UNDERWATER
Companies often offer stock options to employees as a way to motivate and retain staff. But the options lose value when the market price of the underlying stock falls below the exercise price, which pushes them “underwater.”
Software vendor Oracle blamed the currency impact of a strengthening U.S. dollar for a decline in its second-quarter earnings, reported Thursday. While sales rose against the year-ago quarter, they came up short of analysts’ expectations.
Oracle (ORCL, Fortune 500) reported net income of $1.3 billion or 25 cents per share, down 1% from one year ago. Adjusted for select expenses, the Redwood Shores, Calif. company reported earnings of 34 cents per share, which met analysts’ consensus expectation, according to Thomson Financial.
Oracle’s sales rose 6% from a year ago to $5.6 billion, below analysts’ expectations of $5.84 billion.
Oracle depends on international sales for about half of its revenue.
In a conference call following the earnings report, Chief Financial Officer Jeff Epstein said he expects both non-GAAP and GAAP total revenues to grow 8% to 11% in constant currency and 1% to 4% in today’s rates. He expects non-GAAP earnings per share to be 34 cents to 36 cents a share in constant currency and 31 cents to 33 cents a share assuming today’s rates.
"We signed our largest on-demand sales force automation contract this quarter," Oracle CEO Larry Ellison said in a statement bad credit pay day loans. "This was just one of several recent wins over Salesforce.com. We also sold our first database machine, launching an all-new and important business for Oracle."
Oracle has acquired 11 companies in 2008 in order to successfully compete with other large players in the software arena including Microsoft (MSFT, Fortune 500), IBM (IBM, Fortune 500) and SAP (SAP).
But the acquisitions haven’t given their clients reason to buy. "The selling environment is terrible," said JMP Securities analyst Patrick Walravens, in a client note released before the earnings report.
Walravens also pointed out that weak IT spending could slow sales cycles going forward. Epstein addressed that projection in the call, stating that renewal rates have continued to increased despite the sour economy because customers value the benefits they receive from updates and support.
Google Inc canceled plans for a search advertising partnership with Yahoo Inc amid opposition from antitrust regulators and advertisers, Google’s chief legal officer said in a blog posting on Wednesday.
Yahoo expressed dismay at Google’s decision, saying it was “disappointed that Google has elected to withdraw from the agreement rather than defend it in court.”
The U.S. Justice Department, in a statement issued on Wednesday, said it had told Google that it planned to file a lawsuit to block the deal on antitrust grounds.
“Had the companies implemented their arrangement, Yahoo’s competition likely would have been blunted immediately with respect to the search pages that Yahoo chose to fill with ads sold by Google rather than its own ads,” the Justice Department said.
Google shares were down 2.05 percent in late-morning trade at $359.30, while Yahoo was up 4.34 percent at $13.93. Both are traded on the Nasdaq market.
Google and Yahoo, Nos. 1 and 2 in the Internet search market, announced the planned partnership in June but delayed implementation to allow the Justice Department to scrutinize it for antitrust issues.
Google said it pulled out of the deal rather than face a protracted legal fight.
“After four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement,” the Google legal officer, David Drummond, said in his Internet posting bad credit pay day loans.
“We’re of course disappointed that this deal won’t be moving ahead,” he said.
Between them, Google and Yahoo had more than 80 percent of the web search market in August, according to comScore Inc.
In some ways, Google’s decision to scrap the deal comes as a surprise. In August, Google Chief Executive Eric Schmidt said the company would move forward with the partnership in October, with or without approval from the Justice Department.
Advertisers — who apparently had the ear of regulators — hotly opposed the deal, arguing that Google and Yahoo’s dominance of the market could mean they would rise prices.
Part of the impetus for Google’s decision could be Yahoo’s talks on buying the content and advertising operations of Time Warner Inc’s AOL unit. Yahoo initially struck a deal with Google as a way to fend off an unsolicited takeover bid from Microsoft Corp.
There had been hints that the Justice Department was prepared to challenge the Google-Yahoo deal: The department hired litigator Sandy Litvack to work on its probe of the agreement.
Litvack was the department’s antitrust chief under President Jimmy Carter.
European Central Bank Governing Council member Ewald Nowotny said there is no need for the ECB to change borrowing costs any time soon.
“The current level'' of interest rates “is adequate to ensure price stability over the medium-term,'' Nowotny, who is also head of Austria's central bank, said in an interview today in Bratislava, Slovakia. “The ECB follows a steady-hand policy, this has proven itself.''
The ECB earlier this month kept its benchmark lending rate at a seven-year high of 4.25 percent to fight inflation even as the economy cools. While the ECB along with the world's largest central banks has pumped cash into money markets over the past week to ease a credit squeeze, Nowotny said that he doesn't see “any reason'' for Europe to adopt similar measures to the U.S.
The central banks sought to soothe money markets after last week's collapse of Lehman Brothers Holdings Inc. and the U.S us fast cash easy payday loans. government's takeover of American International Group Inc. threatened to derail financial markets. That led to the unveiling of the U.S. government's $700 billion rescue plan to restore confidence.
“Europe can't be compared with the U.S. Our financial system is inherently more stable,'' said Nowotny, who joined the ECB governing council last month. “We have to remain cautious. It is to be hoped that the massive intervention by the U.S. government has a stabilizing effect.''
Nowotny today reiterated that the ECB has “no bias'' when it comes to interest rates. While it is a “realistic goal'' to expect inflation to fall below the ECB's 2 percent limit by 2010, the bank will monitor wage developments “with great alertness and some concern,'' he said.
The latest move by the Fed appeared to work - for a few hours at least.
The announcement early Thursday morning that the Federal Reserve and several other foreign central banks were injecting $180 billion of cash into the market - on top of the $67 billion provided earlier this year - is the Fed’s latest attempt to restore faith in the financial system.
The move follows the Fed’s fevered, but ultimately failed, talks over the weekend to try and save Lehman Brothers (LEH, Fortune 500), the decision on Tuesday to hold interest rates steady and Tuesday night’s stunning $85 billion loan to insurer AIG (AIG, Fortune 500).
Unlike those actions, the cash infusion seemed to soothe investor fears, albeit temporarily. U.S. stock markets all shot up Thursday morning, following a rise in European stock markets.
But how long this sense of relief lasts is anybody’s guess. In fact, stocks turned south by early afternoon before heading higher again.
Clearly, the move to put more money into what are, to put it mildly, fragile markets is a good thing.
Still, some wonder if the confidence boost will be fleeting as investors continue to speculate about who the next financial bailout or bankruptcy might be.
"I think this helps. Liquidity is an issue," said Phil Dow, director of equity strategy with RBC Wealth Management in Minneapolis. "But trust has to be earned and that doesn’t happen overnight."
Even though this morning’s rally faded away around noon before resuming again later in the day, it’s important to point out that, regardless of what happens with stocks, the new round of cash could lead banks to finally begin lending to one another again.
"This is a focused, well coordinated and well targeted action aimed at dealing with the unfortunate fact that private sector financial institutions worldwide are unwilling to lend to each other," said Daniel Alpert, managing director of Westwood Capital, a New York-based investment bank.
Alpert explained that the Fed and other central banks "did exactly what they needed to" since the deepening credit crisis has caused banks across the globe to seize up as fears spread that nobody is immune.
"This week left banks scrambling for the life-sustaining plasma of overnight funds, because now every institution is concerned - with a lot more justification than in prior months - that every other institution is about to go down - including themselves," he said.
Without doubt, the collapse of Lehman and AIG, combined with Merrill Lynch’s (MER, Fortune 500) decision to sell out to Bank of America (BAC, Fortune 500), has caused all major financial institutions to rapidly rethink what the banking landscape will look like in the next few months.
So the deal making in the sector is probably not even close to being over…as evidenced by the published reports indicating that Washington Mutual (WM, Fortune 500) is shopping itself and that Wachovia (WB, Fortune 500) is talking to Morgan Stanley (MS, Fortune 500).
"People are scared to lend anyone money easy quick payday loans payday loan cash advance loan. Nobody’s sure who is safe and who isn’t," said David Wyss, chief economist with Standard & Poor’s. "So we are going to have to see more consolidation take place and people have to feel more confident about lending to each other."
Don’t get me wrong. The addition of $180 billion may help unfreeze the credit markets. And that is sorely needed.
But a new era on Wall Street is beginning…and even with the help of the Fed, it’s too late to undo the damage that’s already been done. Some big brand-name banks have died and more will do so.
The best the Fed can hope for now is to stop the bleeding and let the strongest firms on Wall Street figure out how to make the pieces in the merger puzzle fit.
AIG is out of the Dow: Finally, a quick comment on AIG being booted from the Dow Thursday morning. Kraft (KFT, Fortune 500) is replacing it. As I wrote on Monday, this had to happen but I’m surprised that the folks at the Wall Street Journal didn’t use this an excuse to kick out other companies in financial distress, such as GM (GM, Fortune 500).
Still. I’m going to do my best Stephen Colbert now and gloat that I called it! I said back in June and that Kraft was a great candidate for the Dow. Ok. Gloating over.
Oil prices fell Tuesday, as investors believed OPEC will keep production at current levels, and as Hurricane Ike lost strength over Cuba.
U.S. crude for October delivery settled down $3.08 to $103.26 a barrel, the lowest close since April 1, when oil ended the day at $100.98 a barrel.
Waiting for OPEC: The Organization of Petroleum Exporting Countries met Tuesday to discuss production levels in light of falling prices and a perceived pullback in demand as the world economy slows.
Slumping global energy demand has caused the price of crude to fall sharply from the record-high $147.27 a barrel, set on July 11.
Because of the more than $40 drop in oil prices, some OPEC member-states have been calling for tighter production requirements.
As the cartel met in Vienna, traders listened for word on possible production cuts.
The oil minister of Saudi Arabia, Ali Naimi, indicated that he did not think the production levels need to be changed, according to reports from the Associated Press.
"The market is fairly well balanced," Naimi told the AP on Tuesday. "I think things are in balance, in a healthy position." Because Saudi Arabia is a heavyweight in the cartel, Naimi’s comments were closely watched.
A day before, the oil minister from Kuwait expressed similar sentiment.
The meeting was still in progress as floor trading ended in New York.
"If they cut production to try to shore up prices, that would be viewed very unfavorably by the markets that are struggling," said Phil Flynn, senior market analyst at Alaron Trading.
"I don’t think OPEC wants to be viewed as muddying up the waters here, so they will be forced to do nothing," he said. "My general sense right now is that OPEC is more concerned about demand destruction than about the price drop."
Another analyst said that while it looks as if OPEC will not officially cut production, it may try to adhere to quotas more strictly.
"They are probably 700,000 to 800,000 barrels each day over their quotas," said Andrew Lebow, a broker at MF Global in New York. "The chat is that they might adhere more to the quotas."
"As usual, the Saudis are the key," said Lebow. When it comes to the "increase over the quotas, they are the ones that have the lion share."
Hurricane Ike: Hurricane Ike lost strength Tuesday and moved toward missing most U.S. offshore facilities, reducing worries that it could keep production shuttered in the Gulf of Mexico.
The National Hurricane Center downgraded the storm to a Category 1 hurricane as it passed over Cuba.
"There is a sense that the storm might not be as bad as originally feared, and that is good news for the market, but it is also bearish news," said Flynn faxless cash advance fast payday loan no faxing.
If supply is not impacted, then prices move lower, as the market focuses on sagging demand.
It seems that Ike "is going to miss most of the U.S. crude production and natural gas production areas, and track more toward Southern Texas and the Yucatan peninsula in Mexico," said Lebow. But the oil market will continue to monitor Ike, because the track can change.
The storm was expected to reach the southeastern Gulf of Mexico as early as Tuesday afternoon. "Some weakening is likely as Ike crosses Western Cuba," the Hurricane Center’s public advisory said. "But restrengthening is expected once Ike moves into the Gulf of Mexico."
Gulf production: Oil rigs and refineries in the Gulf region remained on standby more than a week after Hurricane Gustav slammed into the coast of Louisiana.
About one quarter of the nation’s oil production facilities are located in the Gulf.
As of Tuesday, 79.4% of crude oil production and 64.2% of natural gas production in the Gulf of Mexico remained shut from Gustav, according to the Department of Energy.
Gustav damaged two offshore drilling rigs owned by Transocean (RIG) in the Gulf of Mexico, according to Guy Cantwell, a spokesman for the company. Gustav also damaged the mooring system on a third rig, the company said Monday.
Shell has decided to wait until after Ike to return completely into the Gulf.
"Remaining production recovery from Gustav will be delayed until after we can redeploy after Hurricane Ike has safely passed," according to a written statement on Shell’s Web site.
Currently,Shell (RDSA) has 240 personnel working on offshore facilities, but plans to "evacuate most or all of our Shell operated assets by Wednesday or Thursday."
On Monday, U.S. crude oil for October delivery settled up 11 cents to $106.34 a barrel, but not before falling from a trading high of $109.89 earlier in the day. A dollar rally on Monday moved oil prices back more than $3 off early session highs.
Powered by WordPress -- XHTML 1.0