Khamis, 30 Jun 2011

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The Star Online: Business


Oil drops 11% in 2nd quarter

Posted: 30 Jun 2011 05:51 PM PDT

NEW YORK: After rising to become an obstacle to economic growth, oil prices went backward in the second quarter.

The benchmark price in the U.S. dropped nearly 16 percent in May and June, and closed the quarter with an 11 percent decline. Having settled at $95.42 per barrel Thursday on the New York Mercantile Exchange, oil is back where it was in late February. And at $3.54 per gallon (3.8 liters), the national average for gas is almost 7 cents lower than when the quarter started.

But there were worried economists and frustrated drivers along the way. Oil rose 7 percent in April and peaked near $115 per barrel on May 2. Gas hit $3.98 per gallon days later.

High fuel prices were blamed for everything from lagging consumer confidence to lower retail sales. Consumers are still feeling the effects, but "the bubble has popped," analyst and trader Stephen Schork said. "(Oil prices) were going like gangbusters in April. Then we gave it all back really fast."

The turnaround came as consumers balked at soaring gasoline prices and some of the world's major oil importers released emergency supplies. There were also echoes of last year's second quarter: A financial crisis in Europe and questions about the global economic recovery pulled prices lower.

Still, the 28-nation International Energy Agency, which includes the U.S., remained worried enough about oil's impact on the global recovery that it pledged last week to release 60 million barrels of crude and refined products onto the market in an effort to prevent another price spike.

The second-quarter decline surprised many investors and there's little consensus on where prices go from here. Most analysts do expect prices to be especially volatile in the second half of the year. There were 37 days in the first six months where prices either rose or fell by 2 percent or more.

The U.S. Department of Energy expects oil to rise from an average of about $98.55 in the first half to $101.91 per barrel by the end of the year. Some analysts, however, expect prices to be lower than that, maybe falling to $80 per barrel by New Year's Eve.

Oil will move depending on the answers to four major questions, experts say:

- How much oil will China consume? China's oil appetite is expected to drive world demand for years. But there are signs of a pull back. Platts, the energy information arm of McGraw-Hill, said earlier in June that China's oil consumption grew 8 percent in May. That was the second month of single-digit growth after consumption had expanded 10 percent or more in each of the previous six months. If China's consumption lags estimates, expect oil prices to tumble.

- Will non-OPEC countries release more oil? Oil plunged last week after the IEA announced the release of oil. The group said it should more than make up for the loss of Libya's 1.5 million barrels of daily exports. The release is only a temporary fix, however, and analysts say world supplies will continue to tighten - pushing prices higher - unless IEA loosens the spigot again.

- Will there be another Arab Spring? Tensions have died down in North Africa and the Middle East since the spring. But any new flare-up in the region will push oil higher. Turmoil in Yemen, for example, has left President Ali Abdullah Saleh badly injured and clinging to power. A regime change there would destabilize a country that sits along one of the world's crucial oil shipping lanes.

- Will Greece's financial troubles continue to hurt the European economy? Greece's approval of financial reforms this week cleared the way for more international aid. But the country still must prove in September that it has implemented new austerity measures to be eligible for more bailout money. Failure to do so could further destabilize the euro and push oil lower. Oil, which is priced in dollars, tends to fall as the dollar rises versus other major currencies.

The direction of oil prices also depends on expectations for world economic growth. Economists have forecast global oil demand at a record 89 million barrels per day this year. If the global economy slows and demand forecasts drop, oil prices would keep sliding in the third and fourth quarter.

"I'm always concerned that demand will come in significantly lower than what they're expecting for the second half of the year," said Michael Lynch, president of Strategic Energy & Economic Research. "Everyone's buying more fuel-efficient cars. Eventually that's going to make a difference."

There are also random events, like hurricanes in the Gulf of Mexico, which could affect prices.

In other Nymex trading Thursday, natural gas prices rose after the government reported that U.S. supplies grew less than expected last week. The Energy Information Administration said that storage levels rose by 78 billion cubic feet. The natural gas contract for August delivery gained 5.9 cents to settle at $4.374 per 1,000 cubic feet. For the quarter, natural gas prices were little changed.

Heating oil for July delivery added 1.25 cents to settle at $2.9327 per gallon and gasoline futures for July added 2.19 cents to settle at $3.0316 per gallon. Both contracts expire on Thursday.

In London, Brent crude gained 8 cents to settle at $112.48 on the ICE Futures Exchange. - AP

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US stocks rise as Greece clears final bailout hurdle

Posted: 30 Jun 2011 05:49 PM PDT

NEW YORK: Four days, 480 points.

That's how the Dow Jones industrial average closed the final four days of June. The Dow added more than 150 points on Thursday alone after Greece cleared the final hurdle needed to receive its next installment of emergency loans. A pickup in manufacturing around Chicago also pushed indexes higher.

The weeklong rally began Monday when Nike Inc. reported quarterly results that showed that consumers were spending more than expected. The stock market's gains put it on track for the best week since July of last year.

It was a stunning reversal from the beginning of the month, when the Dow dropped nearly 280 points in one day. The first day of June, reports showed that auto sales fell sharply in May and that private companies were hiring far fewer people than expected. The late surge was not enough to turn the broader stock market positive for the month, but it brought the Dow up 0.8 percent for the quarter. The Standard and Poor's 500 index and Nasdaq composite each lost about 0.3 percent for the month.

Thursday's gains came after Greek lawmakers passed a cost-cutting bill that had to be approved before international lenders would release $17 billion in rescue funds to Greece. The country needs the money to avoid defaulting on its debt. A default by Greece could disrupt financial markets and lead to a widespread European financial crisis.

Traders were also reassured by encouraging signals about the U.S. economy. A trade group reported that manufacturing in Chicago sped up unexpectedly in June. Analysts had forecast a decline. Earlier in the week, Nike Inc. reported earnings that were better than analysts had predicted. That led many investors to believe that high gas prices haven't stopped consumers from spending on non-necessities.

The Dow rose 152.92 points, or 1.3 percent, to 12,414.34. The S&P 500 added 13.23, or 1 percent, to 1,320.64. The Nasdaq composite gained 33.03, or 1.2 percent, to 2,773.52.

Companies that typically benefit from global expansion led the Dow. Intel Corp., Caterpillar Inc., and Hewlett-Packard Co. each gained more than 2.4 percent.

Stocks are still below the 2011 highs they reached in late April, when a series of weak economic reports indicated that the U.S. economy was slowing down. Since then investors have been debating whether the slowdown would be a short-term blip or the beginning of a long stall in the economic recovery.

"We have been in the camp that says it's temporary," said Brad Sorensen, a market analyst at Schwab. Sorensen says the pickup in Chicago manufacturing was the latest proof that the short-term slowdown view is correct

The manufacturing report, along with the government's formal end to its bond buying stimulus program known as QE2, sent bond prices lower as investors put less money into safer assets. The yield on the benchmark 10-year Treasury fell to 3.16 percent from 3.11 percent late Wednesday. Bond yields rise when prices fall.

Among U.S. companies, metals manufacturer Worthington Industries Inc. jumped nearly 10 percent after the company raised its quarterly dividend and said it would buy back up to 10 million shares of its own stock. Callaway Golf Co. fell 1.7 percent after the company shook up its leadership, announced job cuts and said it expects to have weak results in the second quarter. And fertilizer maker CF Industries Holdings Inc. fell 5.1 percent on news that farmers planted more corn in spring, which may weigh on prices and reduce farmers' income.

Three stocks rose for every one that fell on the New York Stock Exchange. Volume was average at 3.8 billion shares. - AP

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Reports say FTC investigating Twitter

Posted: 30 Jun 2011 05:45 PM PDT

WASHINGTON: Federal regulators are looking into the interactions between Twitter and a company called Ubermedia, which develops applications that help users follow and communicate with each other on Twitter's popular online messaging service, according to two published reports.

The Federal Trade Commission inquiry is still at a preliminary stage and the focus remains unclear, the Wall Street Journal reported Thursday.

The Business Insider blog, which first reported the probe, said FTC antitrust investigators are studying how Twitter deals with outside companies that build applications for its messaging platform -such as photo-sharing, URL-shortening and advertising services - and whether it is trying to limit competition by buying or banning outside developers.

The FTC regularly looks into complaints - often filed by rivals - of anticompetitive behavior by companies in the technology sector. The initial probes do not always turn into full-blown investigations.

The Journal reported that Twitter blocked UberMedia from accessing messages on its platform, called "tweets," earlier this year, but has since restored access.

The FTC and Twitter declined comment. Ubermedia did not immediately respond to a request for comment. - AP

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