Oil prices rallied last week on optimism that the sovereign debt crisis in Europe would be contained, as the market seemed temporarily convinced that a viable plan emerged from a recent meeting of the European Union in Brussels. NYMEX oil futures surged nearly 10%, the largest one day increase since March 2009.
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Economic news always has an impact on energy stocks and this week will be a busy one for investors. U.S. Factory orders for May 2012 are scheduled to be released on Tuesday, July 3rd at 10:00 a.m. EST, with the consensus estimate at a 0.1% increase. This report covers orders for both durable and nondurable goods.
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The markets are closed in the U.S. on Wednesday for the Independence Day holiday, but later in the week, more economic data will be incorporated into the evolving view of current economic growth and the expected impact on commodity prices and energy stocks.
On Thursday, July 5th, the ADP national employment report will be released at 8:15 a.m. EST, followed by the latest report on jobless claims at 8:30 a.m. EST. Consensus estimates are that ADP will report 95,000 private sector jobs added in June 2012 and the government will report jobless claims of 386,000 for the week ending June 30. The ISM non-manufacturing survey will be released at 10:00 a.m. EST, with the market looking for an index level of 53 for June 2012.
The Energy Information Administration (EIA) is set to release data on inventory levels for crude oil and natural gas in the U.S. on July 5th, and these updated numbers will also move markets.
The market will also be focused on the monthly nonfarm payroll set to be released on Friday, July 6th, at 8:30 a.m. EST. The consensus is for 90,000 jobs added in May 2012, up from the 69,000 added the prior month. The unemployment rate is expected to be unchanged at 8.2%.
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Tropical Storm Debby finally hit the Gulf of Mexico last week, leading many oil and gas companies to evacuate platforms and other facilities in the affected area. Operators with production or ongoing exploration development here include Exxon Mobil (NYSE:XOM), Anadarko Petroleum (NYSE:APC), BP (NYSE:BP), Apache Corporation (NYSE:APA) and Marathon Oil (NYSE:MRO). Although these companies had to shut in production during the evacuation, the lost production is expected to have little impact on the market in the long term.
Labor trouble hurt Statoil (NYSE:STO) as Norwegian oil workers went on strike last week, curbing oil and natural gas production. The company was forced to shut in over 150,000 barrels per day of crude oil production.
Talisman Energy (NYSE:TLM) walked away from participating in a gas-to-liquids facility in partnership with Sasol (NYSE:SSL) that was under consideration in Western Canada. The company believes that a better use of capital would be to develop oil and liquids properties directly.
Reuters reported that Chesapeake Energy (NYSE:CHK) and Encana (NYSE:ECA) may have colluded when bidding in public auctions of oil and gas leases in Michigan. The agency based its claims on emails exchanged between the management of both companies.
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The Bottom Line
Despite the rally in oil prices last week, the market remains concerned about sluggish economic activity in the U.S. and abroad. This will keep oil prices and energy stocks volatile in the week ahead.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.