Oil prices fell last week as the market absorbed the implications of a weak payroll jobs report in the United States, along with continued fears on slowing economic growth in Europe and China.
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The U.S. government reported that 80,000 non farm payroll jobs were added in June 2012, below the consensus of 100,000 jobs, sending crude oil prices down approximately 3%. The unemployment rate held steady at 8.2%.
China reduced interest rates last week for the second time in two months as fears grow that economic growth will continue to slow in that country, with economists expecting second quarter GDP growth of 7.6%. This would be the slowest rate of expansion since The Great Recession of 2007 & 2008, and be the sixth consecutive quarter of slowing economic growth for China.
SEE: The 2007-08 Financial Crisis In Review
Anadarko Petroleum (NYSE:APC) sold a minor stake in the company's Lucius development project in the deepwater area of the Gulf of Mexico. The company will receive a $556 million drilling carry for a 7.2% working interest in the project. Anadarko Petroleum would not disclose the buyer and expects to stay as operator and own a 27.8% working interest in the Lucius project.
The Lucius project is located on four separate blocks in the Keathley Canyon area of the Gulf of Mexico and will have a capacity to produce 80,000 barrels of oil and 450 million cubic feet of natural gas per day. The company expects first production from the Lucius project in the second half of 2012, with FMC Technologies (NYSE:FTI) responsible for the subsea infrastructure on the project.
The contentious Keystone XL Pipeline moved one step closer to reality last week as TransCanada (NYSE:TRP) received a second required permit from the U.S. Army Corps of Engineers. Keystone XL is designed to transport crude oil from the oil sands of Canada down to the United States, and still needs several other permits from various governmental authorities before construction can begin.
SEE: The Keystone XL Pipeline Explained
Other operators involved with Lucius include Exxon Mobil (NYSE:XOM), Eni (NYSE:E), Plains Exploration & Production (NYSE:PXP), Petrobras (NYSE:PBR) and Apache Corporation (NYSE:APA).
The industry continues to find oil and natural gas across the globe with ATP Oil & Gas Corp (Nasdaq:ATPG) reporting success at the Shimshon well in the Levant Basin located offshore Israel. This is the same area where Noble Energy (NYSE:NBL) has reported several major natural gas discoveries over the last few years.
The hunt for more energy resources has led the industry to search in a number of frontier areas over the last decade with Afghanistan being the latest country to attract interest. Exxon Mobil is considering participating in a bid tender on six blocks in the Afghan-Tajik Basin of Northern Afghanistan, according to Reuters.
Afghanistan signed a deal with PetroChina Company Limited (NYSE:PTR) in late 2011 to explore for oil and gas resources in a different basin.
This week will have few economic releases expected to have an impact on oil and natural gas prices, although investors should watch for inventory reports due to be released mid-week. The Energy Information Administration (EIA) reports on U.S. petroleum inventories on Wednesday, July 11 at 10:30 EST, followed by natural gas in underground storage on Thursday, July 12 at 10:30 EST.
SEE: Uncovering Oil And Gas Futures
The Bottom Line
Commodity prices remain weak, as the market continues to obsess about sluggish growth in the U.S., the crisis in Europe and the possibility of slowing economic growth in China and other emerging markets, which is the engine of global growth that seems to be holding everything together.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.