Market Update: European shares closed lower on Thursday as oil and gas companies weighed down indexes already under pressure

Thursday, November 23, 2006
By Benjamin Train

The Narrow Trading Patterns Continue
The market is now trading range bound. U.S. crude oil Jan. futures prices moved up Thursday from $59.24 to $60.05 per barrel, and U.S. Unleaded rose slightly from $1.58 to $1.5873 per gallon. Crude Oil and the Gold have not been in synch for a while now. This "breakup" began on October 5, 2006.

From time to time they attempt to get back into synch, but haven't been able to hold on. I expect that will change as we get into the deep winter, once the weather turns cold. Come spring, I expect to see Crude Oil much higher than it is now, in preparation for next summer's driving season.

Crude Oil prices are attempting to stabilize between $55 and $60 a barrel. Gasoline prices are roughly 9-cents lower than they were at this time last year while Crude Oil is nearly $20 lower than its July 14th peak of $81.14.

It appears that the financial markets have adjusted to overall historically high energy prices. While it's much too soon to state that Crude Oil has seen its' low, it's not in appropriate in my opinion to say that breaking oil prices don't seem to be dragging Gold prices lower.

The Dollar and Gold are now tracking an inverse relationship. This Dollar's influence again took hold just as Crude Oil prices began to break away from their long standing "direct" relationship with Gold. When Oil went up Gold went up and vice versa. If the Dollar maintains its current inverse relationship with Gold and if OPEC becomes successful in regaining control over Crude Oil prices, together this will provide Gold with very bullish case for much higher prices. the impact of the falling US Dollar and rising European Currencies are having an impact on Gold.

Gold prices are right now at the top end of its trading range. I see $638 as the current resistance and upside price target.

U.S. Crude Oil slides Wednesday as crude stocks prices swelled

Build of 5.1 million barrels is far higher than analyst predictions; gasoline supplies show surprise gain as well.

Oil prices fell Wednesday after the government reported swelling crude supplies and gasoline stocks that showed a surprise build.

U.S. light crude for January delivery lost 77 cents to $59.40 a barrel on the New York Mercantile Exchange. Oil traded up 3 cents just prior to the report's release. A sizable build in Gasoline stocks and weather forecasts calling for average to above average temperatures in the eastern half of the US also weighed on Oil prices. The initial sell-off wiped out all of yesterday's gains from the slowdown of Oil movement through the Trans-Alaska Pipeline due to severe weather.

In its weekly inventory report, the Energy Information Administration said crude stocks ballooned by 5.1 million barrels last week. Analysts were looking for a gain of 600,000 barrels, according to Reuters.

Distillates, used to make heating oil and diesel fuel, fell by 1.2 million barrels while gasoline supplies rose by 1.4 million barrels. Analysts were looking for a 1.2 million barrel drop in distillates supplies and a 900,000 barrel decline in gasoline stockpiles.

Oil prices have fallen over 25 percent from highs reached in July and have been range-bound near $60 for the last several weeks.

But stocks of oil majors, including BP (Charts), ExxonMobil (Charts), ConocoPhillips (Charts) Chevron (Charts) and Royal Dutch Shell (Charts), have stopped mirroring crude prices and have rebounded since mid-September as traders bet on rising oil prices and search for deals in a sector many see as undervalued.

Wednesday, November 23, 2006
A lower Brent-crude price limited downside for transport stocks, but weighed on oil and gas producers such as BP (BP : bp plc sponsored adr News , chart, profile, more
Last: 66.61-0.40-0.60% 4:00 pm 11/22/2006 Delayed quote data

InsiderDiscussFinancials

BP66.61, -0.40, -0.6%) (UK:BP: news, chart, profile) and Royal Dutch Shell (UK:RDSA: news, chart, profile) (RDS.A : royal dutch shell plc spons adr a News , chart, profile, more
Last: 70.05-0.21-0.30%4:00pm 11/22/2006 Delayed quote data

InsiderDiscussFinancials

RDS.A70.05, -0.21, -0.3%) , which closed down more than 0.7% in London's FTSE 100 index (UK:UKX: news, chart, profile) . The FTSE itself fell 0.33% to 6,140.00.

The pan-European Dow Jones Stoxx 600 index (ST:SXXP: news, chart, profile) slipped 0.73% to 355.07, and the German DAX Xetra 30 index (DX:1876534: news, chart, profile) finished flat at 6,476.12. U.S. shares finished higher Wednesday, with trading closed Thursday for Thanksgiving. See Market Snapshot.

"We're not going to get a lead from Wall Street because of Thanksgiving. Markets are relatively quiet, and we are drifting a little bit," said Philip Shaw, chief economist at Investec Securities.

Shaw also noted that the Ifo indicator of the German business climate rose to a joint 15-year high of 106.8 in November from 105.3 in October. This was ahead of expectations of a slight decline.

The French CAC-40 (FR:1804546: news, chart, profile) dipped 0.51% to 5,424.86.

Shares in Air France-KLM (AKH : air france klm sponsored adr News , chart, profile, more
Last: 41.67+1.37+3.40%4:01pm 11/22/2006 Delayed quote data

InsiderDiscussFinancials

AKH41.67, +1.37, +3.4%) (FR:003112: news, chart, profile) lost 6.5% after Europe's largest airline reported a below-forecast second-quarter operating profit and added to M&A speculation in the airline sector by stating that it had held exploratory acquisition talks with struggling Italian carrier Alitalia (IT:AZA: news, chart, profile) . See full story.