Both Hong Kong and Japan are gung-ho so far this morning(far east time).

http://www.globeinvestor.com/servlet/story/RTGAM.20070116.woil0116/GIStory/

Oil prices settle at $51.21 (U.S.)
MADLEN READ


Tuesday, January 16, 2007

New York — Oil prices dropped below $52 (U.S.) a barrel to new 19-month lows Tuesday on a report that OPEC powerhouse Saudi Arabia said further production cuts aren't necessary right now.

Crude oil has fallen more than 16 per cent this year in a sell-off triggered by a historically warm winter in the Northern United States and sustained by large funds taking short positions in the market, or bets that prices will fall.

Some market participants believe that another production cut by the Organization of Petroleum Exporting Countries could halt the price drop, but until that happens, there's little to stop prices from sliding further.

“It doesn't feel like it's run its course yet. It will probably fall below $50 a barrel — then the Saudis may be more amenable to an emergency meeting,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

Light sweet crude futures for February fell $1.59 to settle at $51.21 on the New York Mercantile Exchange, after hitting a low of $50.53 in earlier trading. Tuesday's settlement price was the lowest since May 26, 2005, when crude closed at $51.01.

Nymex heating oil slid 2.33 cents to settle at $1.4803 per gallon; gasoline fell 6.27 cents to settle at $1.3693; and natural gas futures inched up 3.7 cents to settle at $6.638 per 1,000 cubic feet.

February Brent crude on London's ICE Futures exchange fell 86 cents to settle at $52.26 on Tuesday on London's ICE futures exchange.

The U.S. retail price of gasoline has fallen 4.5 per cent in 2007 to an average of $2.229 a gallon, according to AAA. As of Tuesday, more than half of U.S. states were seeing average pump prices of less than $2 a gallon.

Drivers should see further savings if crude prices stay low, but only about half of the retail cost of gasoline is determined by the price of crude oil, the U.S. Department of Energy says. The rest factors in distribution and marketing, refining costs and profits, and taxes.

Nymex crude's losses Tuesday were sparked by comments from Saudi Oil Minister Ali Naimi that diminished the chance of an emergency OPEC meeting this week — a possibility that had boosted prices Friday. The Nymex was closed Monday for the Martin Luther King Jr. holiday.

“There is no need now (for further cuts) on the basis of what market conditions are,” Dow Jones Newswires quoted Mr. Naimi as saying after he arrived in New Delhi for an international conference organized by India's Oil Ministry.

The comment followed a call on Monday by Venezuela's oil minister Rafael Ramirez for an emergency OPEC meeting to push for another cut.

OPEC in recent months has committed to a total cut in output of 1.7 million barrels per day, including a 500,000 barrel-a-day reduction set to begin Feb. 1. Compliance is believed to be halfhearted. According to Dow Jones Newswires, independent surveys suggest OPEC has cut output by little more than half of its pledged levels. Production remains near 27 million barrels a day or about 700,000 barrels a day above OPEC's target.

“It is not that OPEC is not capable of 100 per cent compliance, but trying to support prices at such high levels invites noncompliance. There is no urgency to cut output,” wrote Peter Beutel of Cameron Hanover in a research note.

This is because prices are still high in historical terms, so OPEC members continue to pull in big profits. The last time crude oil traded at $40 a barrel was in 2004, but Mr. Beutel noted that for roughly 94 per cent of OPEC's history, its daily sales have been at prices below $40 a barrel.

Last week, the National Oceanic and Atmospheric Administration said it expects warmer-than-normal weather in the Northern United States to continue through March, while the U.S. government said supplies of gasoline, heating oil and diesel fuel remained abundant.

The energy market has deflated despite rising tensions in the Middle East, growing global energy demand and escalating violence in Nigeria, Africa's largest oil exporter and the fifth-largest supplier of crude to the United States.

Associated Press Writers George Jahn in Vienna, Austria, and Derrick Ho in Singapore contributed to this report.

Bank of Canada leaves rates alone
TAVIA GRANT


Tuesday, January 16, 2007

The Bank of Canada left its key lending rate unchanged at 4.25 per cent on Tuesday, the fifth time in a row it hasn't budged, and said risks to its outlook are “roughly balanced.”

The move comes amid questions over how much the U.S. slowdown is affecting the Canadian economy, and exports in particular. In its statement, the central bank indicated that the worst is over.

“There are signs that a significant amount of the adjustment in the U.S. housing and automotive sectors has already taken place and that the inventory correction in Canada is well advanced,” the report said.

The bank still expects the economy will quicken to about 2.5 per cent in the first half of this year and that the economy will continue to operate “near its production capacity” throughout this year and next. Economists had slashed their forecasts for Canadian fourth-quarter growth to around 1 per cent amid weaker-than-expected exports.

The central bank was widely expected to stand pat Tuesday and rates aren't expected to move any time soon, analysts said.

“With the risks remaining balanced...any rate movements would be merely fine-tuning exercises,” said Mark Chandler, fixed income strategist at the Royal Bank of Canada, in a note to clients.

Total consumer price inflation should average just above 1 per cent in the first half of this year and return to the 2-per-cent inflation target in early 2008, the Bank of Canada said.

The bank has left rates alone since May, following a series of hikes in prior months, as it tries to balance the risk of weaker exports against a record housing boom. The bank now judges that those risks are balanced.

“In line with the bank's outlook, the current level of the target for the overnight rate is judged, at this time, to be consistent with achieving the inflation target over the medium term,” the bank said.

Inflation has developed largely in line with the bank's expectations in October , with total inflation a little lower than projected and core inflation slightly higher. The bank figures that the Canadian economy was operating “at, or just above” its production capacity at the end of last year.

“The statement was as neutral as they get,” noted Marc Lévesque, chief economics strategist at TD Securities. “In fact, there was not even an inkling of a hint that the bank was poised to cut interest rates any time soon.”

The central bank cut its growth estimate for the second half of last year to 1.6 per cent as softer U.S. demand for building materials and motor vehicles hit Canada's exports, and businesses adjusted inventories.

Details on the bank's views of the economy will come Thursday with the release of its monetary policy report update.

The Canadian dollar weakened to 85.12 cents (U.S.) from 85.71 cents yesterday.

The comparable U.S. federal funds rate currently stands at 5.25 per cent. The policy arm of the Federal Reserve makes its next decision on Jan. 31.

http://www.globeinvestor.com/servlet/story/RTGAM.20070116.wboc0116/GIStory/

Holey Moley! This is beginning to look like my own personal blog.

http://www.globeinvestor.com/servlet/story/ROC.20070126.2007-01-26T212349Z_01_N25403685_RTRIDST_0_BUSINESS-COLUMN-CANADA-MARKETS-COL/GIStory/

Rough ride seen ahead for TSX

26/01/07

By Scott Anderson

TORONTO (Reuters) - Investors are advised to stock up on stomach elixirs if they plan to ride what is likely to be the Toronto Stock Exchange roller-coaster over the next few months.

There will be 200-point gains for the key S&P/TSX composite index <.GSPTSE> over the first half of the year, but they are likely to followed by drops of similar magnitude.

Just look at this past week. After climbing about 240 points in the middle of the week and coming within inches of its record high of 13,053 on Wednesday, the index took a turn for the worse a day later, giving back 83 points.

On Friday, the TSX was up again, rising 52 points.

"The market is racked by indecision right now in what it wants to do," said Rick Hutcheon, president of RKH Investments. "There is very little compelling evidence to suggest that the market should continue to march higher. Conversely there is very little compelling evidence that would suggest the market is due for a correction."

Hutcheon said part of the blame lies in the fact that the market is stuck in a "directionless" phase as investors question their positions in natural resource issues.

Being overweight in these commodities seemed like a good idea at a time when gold was flirting with a 26-year high of $730 an ounce last May and oil was king when it was tapped at $78.40 a barrel in July.

Since then, both have slipped from those highs and investors have started to look for better spaces to park their money.

"Directionless markets, are markets that are backed by the 'story du jour'," he said. "They shoot up 200 points on some thing and then you correct and find another reason to go one way or another."

Worries over the strength of the U.S. economy, which in turn affects worldwide demand for resources, as well as concerns over geopolitical tensions, will continue to weigh on the minds of investors.

"There are a lot of undercurrents, and a lot of undercurrents generate indecision, and indecision gives you a volatile market," Hutcheon said.

Fears that the market's huge gains in recent years -- including a 14.5 percent rise in 2006 and 2005's eye-popping 21.9 percent climb -- have been overdone are adding to the general uneasiness.

"When a lot of investors are not quite sure of what's going to happen and they feel that the market has run its course over the past two or three years, they will tend to pare off gains every time the market moves up a notch," said Joe Ismail, a technical analyst at Maison Placements Canada.

"One step forward, two steps back ... That's the type of volatility we will see."

Ismail is not convinced the worst is over yet and is forecasting a "corrective phase" of 10 to 15 percent between now and April, with geopolitical worries being the prime bugaboo.

But Ismail said he is convinced that once the market shakes off this uncertainty there is nothing but blue skies ahead, predicting the TSX could hit 13,600 sometime this year.

"I don't know whether it will happen in the first six months, or the last six months, but for whatever reason there is enough room for the Canadian market, from the mental side of it, for it to be able to reach that level without having any difficulties," he said.

Some see the current ups and downs as beneficial.

"Volatility is healthy. If you only go in one direction you either get bubbles or depressions," said Julie Brough, a senior advisor at Morgan Meighen and Associates.

"Volatility is not something we should be concerned about. You should see repeated moves down within the 5 to 10 percent range. It's just natural movement."

Brough sees the market testing lows down around 12,200 to 12,300 sometime this year before moving higher.

"The trend is still intact. I don't think we have broken the trend in any way and the market continues to churn higher. But it does need to consolidate sometimes and find a new base and move on. And that's what we are working through."

© Reuters Limited

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Breaking News from The Globe and Mail

Oil prices settle at nearly $57 (U.S.)
J.W. ELPHINSTONE


Tuesday, January 30, 2007

NEW YORK — Oil prices settled just below $57 (U.S.) a barrel Tuesday — a gain of almost $3 — and natural gas soared more than 11 per cent on expectations of more Arctic weather in the U.S.

Renewed concerns about OPEC production cuts also bolstered oil prices.

Light, sweet crude for March delivery jumped $2.96 to settle at $56.97 a barrel on the New York Mercantile Exchange. Prices reached as high as $57.05 during trading before falling back.

March Brent crude at London's ICE Futures exchange settled at $56.39 a barrel, up $2.71.

Meanwhile, natural gas soared more than 80 cents, or 11.6 per cent, to settle at $7.740 per 1,000 cubic feet on the Nymex.

“People were digging their spurs into it. This is just a lot of people running to get out of the way of the rally,” said Tim Evans, energy analyst at Citigroup Global Markets “There wasn't a lot of foresight, not a lot of calculation to it. It's just a reaction to the cold weather.”

Seven-day forecasts on Tuesday predicted temperatures to dip below zero in the Midwest, the heart of the natural gas market, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

“That's just driving the natural gas market up dramatically,” Mr. Flynn said. “And it's leading the way up.”

Colder-than-normal temperatures are also expected through mid-February in the Northeast, which is responsible for 80 per cent of the country's heating oil consumption. Heating oil rose nearly 9 cents to settle at $1.6380 a gallon.

Crude oil also received a boost Tuesday from a Wall Street Journal report that said Saudi Arabia has told its customers it will cut supply by a further 158,000 barrels a day, effective Feb. 1.

“After these cuts, our oil production will have declined by about 1 million barrels a day since last summer,” a senior official said, according to the newspaper.

“It seems a cartel has a right to change its mind,” Mr. Flynn said. “Yesterday, Saudi Arabia says it's happy with $50-a-barrel oil, then today there's a report on the Saudi's cut in production. It's a day of contradictions.”

On Monday, prices fell by more than $1 to settle at $54.01 barrel after a Saudi official reiterated that they don't favour further production cuts and are comfortable with prices at current levels, according to a Dow Jones newswire report. The Saudi Arabia ambassador to the U.S., Turki al Faisal Saudi, was speaking at a National U.S.-Arab Chamber of Commerce event.

The Organization of Petroleum Exporting Countries said it would begin cutting production by 1.2 million barrels a day in November but some traders have speculated that a few cartel members were not complying. The group said late last year it planned to cut production an additional 500,000 barrels a day starting Feb. 1. Saudi Arabia is OPEC's biggest producer.

The markets are also looking ahead to the weekly report on U.S. inventories on Wednesday.

U.S. crude imports are expected to have risen by 1.2 million barrels in the week ended Jan. 26, according to a survey of analysts by Dow Jones Newswires. Gasoline stockpiles are expected to gain 1.6 million barrels, while distillate stockpiles, which include heating oil and diesel, are seen falling by 2.6 million barrels.

In other Nymex trading, gasoline futures rose 8 cents to settle at $1.5213 a gallon.

© The Globe and Mail