Oil prices hit a new record in the morning, but then retreated, after the EIA said gasoline and home-heating oil stocks in the U.S. rose last week.
But the EIA also said U.S. crude oil stocks shrank. And many analysts were convinced before the EIA report that spare production capacity and inventories were dramatically low, so I'm not sure why the EIA report would completely change their minds.
What would be a mind-changer, if it had any credibility, would be the OPEC prime minister's flip-flop about OPEC's spare capacity. Just a day after saying OPEC had none, he suddenly changed his tune on Wednesday and discovered 1.5 million BPD in spare capacity. Surprise, surprise!
Meanwhile, Saudi Arabia brought new oilfields on line faster than expected, and Yukos learned it could keep operating -- all bad news for oil bulls.
But the world is an extremely dicey place for the oil industry, as we've learned repeatedly in the past several months. I'm not holding my breath for a major decline in oil prices any time in the next several months.
Today's report on service-sector activity in July from the ISM showed a robust rebound in the headline number, which is a diffusion index -- a lot of services reported improved activity, in other words.
But, as I've said before, the headline number tells us little about the depth of the rebound. In the details of the report, things get a lot dicier, with lower prices, inventories, backlogs and exports.
Diciest of all is a dramatic plunge in the employment index, to the lowest level since Sept. 2003. Taken with the drop in employment in the manufacturing ISM, the consensus 250,000+ forecast for Friday's payroll number is starting to look a little shaky.
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