Decision Economics --- Sinai, Allen---Economist
>> federal prosecutors won convictions involving five people in the accounting fraud that brought down enron. the 5 people were involved in a sham transaction between two companies involving nigerian barges. one defendant if the case was acquitted. in the interest of disclosure, we tell you that merrill lynch is a passive minority investor in bloomberg lp, the parent of bloomberg news. in keeping with the oil theme, baker hughes has received a subpoena from a federal grand jury in new york related to sales of equipment to iraq from 1995 to 2003. baker hughes sold equipment to iraq under the united nations oil-for-food program which enabled the company to use oil revenue to buy food and supplies. he declined to say what was sought in the subpoena. checking shares of baker hughes in the regular session, up 2.4%. senator john kerry’s concession of the presidential race lifted oil futures this afternoon with their biggest gain in two weeks. early on, nymex crude futures fell bow low―below $49 a barrel. it’s the sixth straight weekly increase in stockpiles but bush’s re-election moved crude higher.
>> you could say the election impact kicked in around mid morning when we had the definitive word on the bush victory and it created a u-turn in the direction of oil trading. the u.s. is likely to keep adding oil to its strategic petroleum reserve and filling that reserve takes more than 100,000 barrels a day off the market . earlier today, the driver of trading was the latest energy department report showing supplies of crude oil rose by 6.3 million barrels to just under 290 million barrels, triple the gain analysts anticipated. inventories of heating oil and diesel fuel were down 900,000 barrels. associate director of energy futures with barclays capital is now saying it will be difficult for oil to continue to trade above $50 a barrel in coming weeks.
>> today’s inventory, obviously, a bigger build than people thought, especially in the crude oil. with that, we’ll see the market feel pressure and some people start to take the short side of the market . as far as the rest of the numbers, demand looks like it might be slipping a little bit and it could be because of the warmer weather and distillates and could be because of higher prices in gasoline.
>> art hogan says fears that supply would not meet demand are starting to disappear.
>> the reason oil went from 35 to 55 was the fear of disruptions of supply and there was a huge speculative bid in the marketplace.
>> let’s look at the retracement on the far right hand of the chart. oil dropped roughly 9% since touching an all-time high of $55.67 a baer just over a week ago. looking at heating oil, home heating oil futures rising more than 2%, reversing an earlier drop of 2%, turning around on the election news.
>> on the bloomberg professional service, i have a chart of oil service stocks and how they did on the day and you see halliburton, varco, superior, better than 4% gains on the day and cal dive over 12% on the day. moving on, it was a strategy that did not quite work for general motors and ford. they hoped the new models would boost sales as the companies cut back on incentives but x.m. and ford reported―g.m. and ford reported lower sales. at g.m., u.s. sales of cars and trucks fell 4.7% from a year ago ford sales were down 5%, in line with estimates. it was a different story at the chrysler unit of daimlerchrysler with sales up 2.3% as the company updated new models. looking at investors’ reaction, g.m. shares down 1% and not much movement on ford and daimlerchrysler shares. investors have economic data to consider. the commerce department says factory orders fell for the second consecutive month. demand for cars, aircraft and steel tapered. economists surveyed by bloomberg were looking for an increase but at the same time, the service economy rose at the fastest pace in three months. the institute for supply management’s index of snawn manufacturing -- nonmanufacturing activity came in up three points from september and above analysts’ estimates. any number above 50 indicates expansion. the data shows business picked up for the nation’s retailers, construction firms and financial service providers. returning after the break, what changes and reforms may we see in the second bush administration? we’ll talk with allen sinai of decision economics.
