Ahead of the Bell: Oil supplies expected to shrink
Analysts expect Energy Department to record drop in oil supplies, increase in gasoline stocks
On Wednesday June 22, 2011, 7:01 am
NEW YORK (AP) -- The Energy Department is expected to report a 2 million-barrel decrease in the nation's crude oil supplies Wednesday for the week ended June 17, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Analysts also expect gasoline supplies to increase by 1 million barrels and distillate stocks, which include diesel and heating oil, to increase by 800,000 barrels. Refinery utilization was forecast to increase 0.7 percentage point to 86.8 percent of capacity.
Oil falls below $94 after mixed US supply report
Oil falls below $94 in Europe on mixed US supply report and stronger dollar
, On Wednesday June 22, 2011, 6:53 am
Oil prices fell below $94 a barrel Wednesday after a crude supply report reflected mixed signs about U.S. demand and the dollar strengthened against other currencies.
By early afternoon in Europe, benchmark oil for August delivery was down 82 cents to $93.35 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 54 cents to settle at $94.17 on Tuesday.
In London, Brent crude for August delivery was down 41 cents to $110.54 a barrel on the ICE Futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories fell 81,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.0 million barrels.
Inventories of gasoline dropped 1.5 million barrels last week, surprising analysts who had forecast an increase of 1 million barrels. Distillates fell 541,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data -- the market benchmark -- later Wednesday.
"Demand figures have not been strong and we still have more crude oil in storage than in previous years," energy consultant Cameron Hanover said in a report.
A stronger dollar also weighed on prices by making commodities like oil more expensive for investors holding other currencies. A stronger dollar usually pushes down crude prices.
The euro slipped to $1.4366 from $1.4416 in late trading in New York, while the dollar strengthened to 80.23 yen from 80.13 yen.
"Markets are ... slightly weaker as they wait for the vote on the Greek austerity package, but likely ready to rally if and when it passes," said Edward Meir at MF Global in New York. "However, the bounce will be brief, as there are still serious problems remaining in Europe. For one thing, other countries are experiencing severe debt issues."
In other Nymex trading in July contracts, heating oil fell 1.75 cents to $2.8725 a gallon while gasoline lost 0.01 cent to $2.8825 a gallon. Natural gas futures fell 1.6 cents to $4.372 per 1,000 cubic feet.
Merkel in Greek debt restructuring warning
Germany's Merkel warns against full-scale Greek debt restructuring
BERLIN (AP) -- German Chancellor Angela Merkel is warning that a full-scale restructuring of Greek debt would have "completely uncontrollable"consequences on the financial markets.
Merkel said Wednesday that imposing a so-called haircut on Greek debt -- reducing the amount to be repaid -- would not only endanger banks and other creditors who hold Greek bonds, but also institutions that sold insurance policies against a default.
Merkel told a parliamentary committee that those credit default swaps have a higher face value than the debt itself.
She says "nobody around the globe knows exactly who holds those papers, who will have to pay how much."
The chancellor wants to get private creditors to contribute to the next aid package for Greece on a purely voluntary basis.
Negotiators tempted by gimmickry in budget talks
Seeking sweeping cuts, negotiators in budget talks are tempted by gimmickry
, On Wednesday June 22, 2011, 5:32 am EDT
WASHINGTON (AP) -- Negotiators seeking to carve trillions of dollars from the deficit are facing temptation to use iffy assumptions and outright gimmickry to exaggerate the size of spending cuts to accompany any increase in the government's ability to borrow to stay afloat.
With both sides reluctant to abandon long-held positions -- Republicans are against tax increases, Democrats oppose cutting benefit programs like Medicare -- those watching the talks being led by Vice President Joe Biden are on the lookout for a familiar set of accounting tricks.
Little wonder. Both already have employed such tricks earlier this year in making their budgets appear leaner than they really are.
The most obvious options available to negotiators are to claim inflated savings from troop drawdowns in Iraq and Afghanistan and to have budget savings pile up over 12 years or so rather than the 10 years that is typical when drafting budgets.
And there's every possibility that the negotiations will generate unrealistic assumptions about cuts to domestic agencies and the Pentagon over the coming decade -- and the real possibility of a deal that would lack enforcement teeth.
Perhaps the most obvious gimmick would be to claim the ongoing drawdown from the troop surges in Iraq and Afghanistan as budget savings.
Already this year, both President Barack Obama and House Republicans have claimed in their budgets more than $1 trillion in savings by taking advantage of the peculiar way government scorekeepers project war costs and by lowballing projected costs in future years.
Under the rules followed by the Congressional Budget Office, the agency currently projects war spending to grow with inflation even as troop drawdowns are ongoing. That means House Republicans could claim more than $1 trillion in savings by cutting the budget for war costs to $65 billion for 2014 and $50 billion a year shortly thereafter.
In the Republicans' defense, they were simply mimicking Obama's budgeting for the war, which claimed nearly identical -- but equally iffy -- savings.
Democrats are pushing to employ the gimmick in the Biden-led talks. When asked about the idea Tuesday, a GOP participant in the talks said it would be wrong to claim the savings.
"It's not something that I think you can legitimately claim out of these talks," House Majority Leader Eric Cantor, R-Va., said. "Certainly the savings may be there, but they're not a product of these talks."
Another option is to lengthen the time frame over which any deficit savings accumulate from 10 years to perhaps 12 years. That's the method used when Obama claimed $4 trillion in deficit savings when offering a revised budget plan in April. An additional two years of spending cuts adds a disproportionate amount of savings since the cuts at the tail end of a budget window are invariably far larger than those produced in the early years.
So Obama's $4 trillion in savings over 12 years computes to more like $2.9 trillion over a decade -- and it's $2.5 trillion using more conservative CBO estimates.
The $4 trillion figure is noteworthy because it's the amount claimed by Obama's deficit commission -- except the savings recommended by the deficit panel accumulated over nine years.
Biden recently said the negotiators were working toward a "real serious down payment on the commitment to four trillion bucks (of deficit cuts) over the next 10 to 12 years." And Sen. Jon Kyl, R-Ariz., also suggested recently that the savings could accrue over a time period of longer than a decade.
Another area for potentially inflated claims of cuts involves the Cabinet agency budgets passed by Congress each year. This so-called discretionary spending runs the gamut from education to defense to homeland security programs. The overall cap on such programs is usually set each year by the annual budget passed by Congress.
Even though the budget sets a one-year cap, policymakers invariably make inflated estimates of how much can be saved over five or 10 years, even though they're impossible to enforce and are often simply based on wishful thinking.
Senate Minority Leader Mitch McConnell, R-Ky., an enormously influential figure, is pressing for a two-year cap set in law. But negotiators may forecast future savings based on that cap, even though prior estimates of multiyear caps have invariably proven bullish.
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