Oil prices are gushing to new highs for the year as drilling activity dropped to the lowest level since 2010. Oil producers have been losing money over the past year as prices plunged due to oversupply. With the current cutbacks, some analysts are expecting that US supplies will soon stop rising, which has encouraged buyers to jump back into the oil market. However, supplies now stand at an eighty-year high, which could dampen further gains.
Meanwhile, as drillers have been losing money and shutting down production, refineries have been benefitting. Refiners have been able to buy cheap US crude oil, producing gasoline and diesel fuel at profitable margins, especially when they are in a position to sell it to foreign markets like Africa and South America.
As of midday Friday, crude oil for delivery in June was worth $58.50 per barrel.
Hogs Run Wild
Hog prices charged to a two-month high this week as pork processors chased the market higher. Recently, there has been a shortfall of market-ready hogs, limiting supplies to meatpackers, which has forced them to pay up for pork. Meanwhile, consumers are beginning to fire up their grills, which should provide increased demand throughout the summer.
Despite the rally, pork prices are still at a significant discount to beef, which could encourage bargain hunters to continue buying hogs instead of cattle.
As of midday Friday, June lean hog futures were worth $0.81 per pound, while June live cattle traded for $1.50.
US paper dollars tumbled like a rock this week as foreign currencies, notably the euro, gained value in comparison. The greenback's value has risen sharply (over 20%) since mid-2014 as central banks of our major trading partners have raced to expand their money supplies, lower their interest rates, or create quantitative easing programs to stimulate their economies.
The sky-rocketing dollar made a downturn this week as signs emerged that the Eurozone economy was improving just as unemployment and retail sales data indicated that the US economy is weakening in comparison. Midweek, the euro was further boosted by hopes that the potential Greek debt default will be delayed as the radical finance minister, Yanis Varoufakis, was effectively removed from decision-making within the Greek government.
U.S. investors, importers, and exporters, can be affected enormously by these developments depending whether they borrow, lend, or hold assets priced in dollars or foreign currencies.