Energy Commodities: Greater Supply, Lower Demand

Energy commodities: greater supply, lower demand...and slower growth? Stocks are lower, as gasoline futureshit limit down ($0.25), and were halted for 5 minutes. Crude was also halted. Crude supplies showed an unexpected gain.

Refiners are getting hit particularly hard: Tesoro , Sunoco , Holly , Frontier and others trading down 4 to 6 percent.

Why are stocks down? It's not just energy and materials that have dropped on this news. The answer is, concerns of slower growth. Global GDP is the single most influential driver of crude prices, but much lower than expected demand also influences perception of growth. Remember there is concern in China on its continuing tightening, and also remember that gasoline has run up on the possibility that Louisiana refiners might be taken out by the flood (not happening, yet).

Another factor: concerns about Europe are weighing on the euro, which has dropped notably this morning, down 1.4 percent against the dollar. The dollar rally has put further pressure against commodities.

Bottom line: commodity supply and demand seems out of whack, and may now be correcting. Copper, down 3 percent, is now at its lowest level since December of last year.

One final point: has the killing of Osama bin Laden taken some pressure off crude? Traders note that crude hit its highs on the Friday before bin Laden's killing was announced on Sunday. Crude began trending down that Monday morning. Some speculate that the fact that there was no reaction to his killing took pressure off crude as well.

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