Wall Street may have been closed for the 4th of July, but news flowing out of Egypt set off fireworks in the oil markets. Recent political unrest in Egypt led to the ousting of Egyptian President Mohammed Morsi. Morsi was overthrown as a result of widespread criticism across Egypt that he was not sharing power and only representing the interests of his political backers, the Muslim Brotherhood. This helped catapult oil over the $100 mark on fears that turmoil in Egypt could interrupt crude oil shipments through the Suez Canal and disrupt neighboring countries like Jordan, Saudi Arabia, and Libya.
While Egypt only accounts for less than 1% of global oil production, nearly 2 million barrels of other nations' oil are shipped through the Egyptian Suez Canal per day which makes the canal a crucial point to the international crude oil markets.
Crude oil also rallied on news that U.S. oil stockpiles were much lower than expected following Wednesday's Energy Stocks Report, which stated that oil inventory stocks were down 10.3 million barrels from the previous week.
In addition, crude oil prices increased into the 4th of July weekend in anticipation of typical high seasonal demand for gasoline. West Texas oil for August delivery traded at $102.60 per barrel in the mid-morning hours on Friday, up over $6.00 (+6.3%) from the previous week.
The Euro Falls
The euro currency continued to fall this week on news that the European Central Bank (ECB) will keep its key interest rate at 0.5%, which is at record low levels and down from 1.5% in October 2011. As a result of this decision, the U.S. dollar had a great Fourth of July as it strengthened against the euro. As the US dollar went up, the euro lost nearly two cents in value, falling to $1.28, the lowest price in nearly two months.
No Boom in the Grain Trade
The grain markets continued adjusting to last week's USDA report which revealed planted corn acreage of 97.38 million acres, much more than expected. During this week, December corn lost another 15 cents per bushel (-2.9%), crumbling to a two-year low at $4.96 per bushel. Production will now depend on the critical July and August weather.