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(CEP News) - Energy prices tumbled on speculation that Tropical Storm Gustav may miss the bulk of offshore facilities in the Gulf of Mexico. Crude oil prices are down more than $3, which has pulled down the Canadian dollar and TSX while giving U.S. markets a lift.
WTI crude rose to a four-day high of $120.48 early in the session but later tumbled, and is now down $3.02 to $115.13. "Some models are show that Gustav is shifting to the west, toward the Mexico-U.S. border" said Mike Fitzpatrick, vice-president of energy risk management at MF Global. Offshore oil and natural gas production in centred off the coasts of Texas and Louisiana. Though some oil companies have already announced the evacuation of platforms, production would be only modestly slowed if the storm tracked west. Fitzpatrick emphasized that the storm is still five days away and the market remains sensitive following the Hurricane Katrina disaster. "I wouldn't be surprised to see oil back up to the highs before the day's out," he said. Energy was also pressured following a U.S. report showing a unexpectedly large build in reserves of natural gas. The U.S. Energy Information Administration said underground storage increased 102 Bcf last week, higher than the 84 Bcf consensus estimate. Natural gas prices have fallen 7.6% since the report. The TSX hit a session high at the beginning of the session as it opened 150 points higher. However, it has come under pressure following the declines in energy prices. Still, the S&P/TSX composite index is up 50 points to 13581 as it is being propped up by banking stocks following earnings reports from RBC, TD and National Bank. The Canadian dollar traded higher for most of the session, but it was also pulled down by the energy sell-off. Traders also said broad U.S. dollar strength and large buying at the 11 a.m. EDT London fix weighed on the loonie. The Canadian dollar is down 0.0063 to 0.9501 against the U.S. dollar (1.0525 USD/CAD) and down 0.59 to 104.09 against the yen. The U.S. dollar is up 0.05 to 109.55 against the yen and the Dollar Index is up 0.082 to 77.133. The euro is down 0.0040 to 1.4687 against the U.S. dollar, up 0.0051 to 1.5457 against the Canadian dollar, up 0.0020 to 0.8042 against the pound sterling and is lower by 0.38 to 160.88 against the yen. The pound sterling is down 0.0095 to 1.8262 against the U.S. dollar and up 0.0019 to 1.9224 against the Canadian dollar. U.S. stock futures were pointing to a negative day until an unexpectedly strong report on U.S. GDP was released. The U.S. Bureau of Economic Analysis revised GDP to 3.3% from the 1.9% preliminary estimate. Economists anticipated it would be revised higher because of trade figures, but the median estimate was for a rise to only 2.7%. The Dow Jones industrial average up 187 points to 11690, the S&P 500 up 14 points to 1296 and the Nasdaq up 24 points to 2406. European stock markets closed with the Eurostoxx up 43 points to 2912, the UK FTSE 100 up 73 points to 5601 and the German DAX up 100 points to 6421. U.S. fixed income sold off sharply following the GDP figures. Market participants also say the market is preparing for a $22 billion, five-year auction. U.S. two-year yields are up 11.7 bps to 2.39%, with five-year yields up 6.8 bps to 3.08%, 10-year yields up 4.9 bps to 3.81% and 30-year yields up 3.2 bps to 4.41%. The Eurodollar March 09 contract is down 5.5 ticks to 97.04. The yield curve is flatter, with the 10/2-year spread down 1.9 bps to 146.23 bps. Yields on two-year Canadian government bonds are flat at 2.76%, with five-year yields up 1.2 bps to 3.05%, 10-year yields flat at 3.53% and 30-year yields flat at 4.01%. The December 08 BAX contract is down 1.0 ticks to 97.08. In Germany, returns on two-year German bonds are up 6.2 bps to 4.15%, with five-year yields up 5.1 bps to 4.10%, 10-year yields up 0.6 bps to 4.18% and 30-year yields down 3.0 bps to 4.58%. Yields on UK two-year bonds are flat at 4.52%, with five-year yields down 0.8 bps to 4.44%, 10-year yields down 2.3 bps to 4.48% and 30-year yields flat at 4.39%. All data taken at 11:58 a.m. EDT. By Adam Button,
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, edited by Nancy Girgis,
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