Archive for December, 2008

Oil jumps 14 percent, products up (Reuters)

Wednesday, December 31st, 2008 | Finance News

NEW YORK (Reuters) –
U.S. crude oil rose 14 percent on the final trading day of 2008 in thin pre-holiday trade on Wednesday, tracking a jump in gasoline as a slowdown in domestic refinery activity sparked fears of tightening fuel supply this winter.

U.S. crude oil futures for February settled up $5.57 to $44.60 per barrel, but down 54 percent from the $95.98 on the last day in 2007.

London Brent settled up $5.44 at $45.59.

This year saw the record high prices in July above $147 a barrel crash to the year low of $32.40 on December 19 as the global recession dissolved world demand.

Weekly U.S. inventory data on Wednesday showed a decline in refinery activity and a 500,000 barrel rise in crude stocks, compared with forecasts for a 1.5 million barrel decrease.

"There's a sign that the industry might be cutting back on production rates to try to boost margins. As heating oil and gasoline prices are rallying, crude is tagging along," said Gene McGillian, analyst at Tradition Energy Stamford, Connecticut.

"The market is trading in pretty thin volume ahead of tomorrow's holiday and I think that's contributing to some of the strength," he added.

Inventories of refined products also rose, though less than analysts had expected. Gasoline stockpiles increased by 800,000 barrels, less than forecasts for a 1.5 million barrel build, while distillates rose by 700,000 barrels, below expectations for a 1.1 million barrel increase.

Demand for both gasoline and distillates, which include heating oil, was lower than the same time a year ago, extending the trend for reduced consumption.

Markets also were watching a dispute over gas supplies between Russia and Ukraine, which may have to buy distillates from Europe if gas supplies from Russia are halted.

Russia's gas export monopoly Gazprom said on Wednesday that talks with Ukraine over gas prices for 2009 have failed, making a cut-off of gas to Ukraine on January1 unavoidable.

"Thrown in with everything else, the Russian threat of a gas cutoff has everyone a bit nervous ahead of the close," said Tom Knight, trader with Truman Arnold in Texarkana, Texas.

Analysts forecast an average of $49 a barrel for U.S. crude in the first quarter, and an average of $58.48 for next year, down $14 from their previous forecasts, the latest Reuters poll showed.

Faced with slumping demand and prices, the Organization of the Petroleum Exporting Countries (OPEC) this month said it was cutting output 2.2 million barrels per day (bpd), its deepest reduction ever.

Evidence is mounting that OPEC is complying with its goal to reduce production, led by top exporter Saudi Arabia.

Market sources said on Tuesday the kingdom's supplies to long-term buyers in February could imply production of even less than its new OPEC production target.

(Additional reporting by Timothy Gardner and Robert Gibbons in New York, Christopher Johnson in London and Chua Baizhen in Singapore; editing by Anthony Barker)


More economic pain seen in 2009, but some hope too (Reuters)

Wednesday, December 31st, 2008 | Finance News

Many investors said good riddance on Wednesday to one of the worst years on record and prayed that government rescue plans will pull the global economy out of its fierce tailspin later in the new year.

More pain is expected in the near-term as bleak economic reports roll in, flagging more bankruptcies, bad debts and layoffs through at least early 2009, and more sleepless nights for everyone from central bankers to consumers struggling to pay off mortgages and credit card bills.

The biggest financial crisis in 80 years, sparked by a U.S. mortgage meltdown, made this year one of the worst ever for investors as recession stalked the global economy.

"It has been a shocking year, hardly anything was spared in the market carnage," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

The slump wiped out nearly $14 trillion in market value, according to the benchmark MSCI world index of larger companies.

"If there's any optimism, it's on the basis that stock markets recover in recessions," said Justin Urquhart Stewart, director at Seven Investment Management.

"Now we have the real recession, rather than the phony recession. Last year we were so optimistic, that we were fooling ourselves. It's now gone too far the other way. We've discounted a huge amount of bad news."

Full-year losses on major world stock indexes ranged from 31 percent in London to 65 percent in Shanghai.


The crisis of 2008 has radically changed the financial landscape, bringing down U.S. investment banks Bear Stearns and Lehman Brothers, saddling other banks with huge losses and freezing the credit system that keeps world business humming.

Victims of the crisis are still piling up, with announcements almost daily of fresh company losses, more layoffs, and slumping prices for assets from cars to homes.

LyondellBasell, the world's third-largest petrochemical firm, said it is considering filing for Chapter 11 bankruptcy protection as it tries to restructure debt.

Next Monday, members of the U.S. House Financial Services committee will take their first close look at the alleged $50 billion fraud by Wall Street financier Bernard Madoff, whose burned investors ranged from bearish "Dr. Doom" economist Henry Kaufman to actor Kevin Bacon.

Madoff faced a deadline on Wednesday to tell regulators how much he is worth and where his money and other assets are.

Oil surged to $44.60 a barrel on Wednesday but was still down 54 percent in 2008, hit by the economic slowdown. Oil has plummeted since a high in July above $147.

Gold was one of the few commodities to end higher on the year as economic turmoil burnished its lure as a haven for investors scampering away from risk.

Economic reports on Wednesday were mixed.

A larger than expected fall in new U.S. jobless claims reported on Wednesday was attributed to seasonal factors. A yearlong U.S. recession has already destroyed 2.7 million jobs, pushing unemployment up to 6.7 percent, with many economists expecting it to rise above 8 percent in 2009.

Separate reports on business activity in New York City and Milwaukee showed no sign of recovery, while 30-year fixed mortgage rates eased for the ninth week as official efforts to bolster the housing market appeared to gain traction.


With central banks cutting interest rates and governments pumping money into the system, some see better signs for 2009.

"I think we'll move ahead a bit in the new year and then stabilize for a while. Global policymakers are doing their utmost to ensure the recession doesn't degenerate into a deflationary malaise," said Mike Lenhoff, chief strategist at Brewin Dolphin.

World governments have started pumping more than $1 trillion into their economies, and more is expected in 2009.

In the latest bailout, the International Monetary Fund said on Wednesday it had agreed on a $2.5 billion emergency loan package with Belarus.

The U.S. Federal Reserve on Tuesday built on efforts to cut mortgage costs, setting a goal of buying $500 billion of mortgage-backed securities by mid-2009.

China's central bank reaffirmed on Wednesday that it would implement a moderately loose monetary policy as it seeks to reinvigorate its once fast-growing economy. [nLV504083]

Indonesia's president promised further fiscal stimulus to help Southeast Asia's biggest economy.

Global credit markets are showing signs of improvement, but banks remain reluctant to lend.

Government stimulus plans, corporate bailouts and rate cuts take time to be felt and their benefits are hotly debated. Nonetheless, mounting job losses are raising fears of social unrest in some countries, and piling pressure on governments to act quickly, even if it means huge deficits and debts.

Investors are now looking to January, when Barack Obama will be sworn in as U.S. president on January 20. He is expected to unveil a government spending programme which sources say could range from $675 billion to $775 billion over two years.

The new year will also mark attempts by policymakers to overhaul outdated regulatory systems to avert future crises.

U.S. Treasury Secretary Henry Paulson said the government had to battle the financial crisis without the tools needed to do the job, the Financial Times reported.

"We're dealing with something that is really historic and we haven't had a playbook," he said.

(Reporting by Reuters bureaux worldwide; Editing by Chizu Nomiyama)


Madoff to meet SEC deadline on assets: lawyer (Reuters)

Wednesday, December 31st, 2008 | Finance News

NEW YORK (Reuters) –
Accused swindler Bernard Madoff will send U.S. regulators a list of his assets, liabilities and property by Wednesday's court-ordered deadline, his lawyer said.

A U.S. judge had ordered Madoff, an investment adviser who is under house arrest after being charged with a purported $50 billion fraud, to provide the information before or on December 31 to the U.S. Securities and Exchange Commission investigating civil charges against him.

"That material will be filed today," said Madoff's attorney Ira Lee Sorkin. "We are in the process of preparing it. It will be done pursuant to the court order."

Sorkin declined further comment and a spokesman for the SEC declined comment.

In general, the regulator is not required to immediately publicly file such disclosures with the courts, which means investors apparently bilked by Madoff will have to wait to find out how much he has left and where it is.

The information provided by Madoff becomes part of the investigation into how Bernard L. Madoff Investment Securities LLC was run and how losses can be recovered by investors. They include the wealthy, banks and charities all over the world in what could be Wall Street's biggest-ever fraud.

Madoff, a former chairman of the NASDAQ stock market, was also criminally charged on December 11 by U.S. prosecutors in New York but he has not appeared in court to formally answer the charges.

The SEC complaint said Madoff, 70, admitted to one or more employees -- later revealed to be his sons -- "that for many years he has been conducting a Ponzi scheme through the investment adviser activities of BMIS and that BMIS has liabilities of approximately $50 billion."

Ponzi schemes are investment frauds in which early investors are paid with money from new clients.

The business had been insolvent for years and Madoff said he had between $200 million and $300 million left, according to the court document.

On December 18, U.S. District Court Judge Louis Stanton, who is handling the civil case, ordered Madoff and his firm to provide the SEC "on or before December 31 a verified written accounting of all assets, liabilities and property currently held, directly or indirectly."

The order said this included bank accounts, brokerage accounts, investments, business interests, loans, lines of credit and "real and personal property, describing each asset and liability, its current location and amount."

On Tuesday, a bankruptcy court judge approved the transfer of $28.1 million to the trustee overseeing the liquidation of Madoff's firm from a bank account held by the firm.

The trustee and the group overseeing the liquidation described the agreement as "an initial recovery of assets" for satisfying customer claims.

(Reporting by Grant McCool; Editing by Brian Moss)