Oil is falling in early morning trade Tuesday, as worries about China potentially raising interest rates overshadows the upward momentum from the $1 trillion Greek bailout package unveiled over the weekend.
China reported consumer prices in April rose 2.8% from a year ago, while producer prices rose by 6.8%. Meanwhile, real estate prices in the country's 70 largest cities surged by 12.8% in April. Speculation is mounting that the Chinese central bank will tighten monetary policy by June in order to keep the red-hot economy from overheating. That in turn would put a damper on the overall global economy, and decrease demand for energy.
At 0750 ET, Brent crude is 1.6% lower at $75.56 a barrel, while light sweet crude is down 1.1% at $79.21 a barrel, and natural gas is 0.1% weaker at $4.17 a million British thermal units.
Concerns are growing too that the $1 trillion aid package to Greece from the European Union and the International Monetary Fund will not be enough to ensure stability in the euro zone, especially amid fears that Spain and Portugal too will soon confront sovereign debt issues similar to that of Greece. At the same time, worries are mounting that governments will not be able to meet their pledge to ailing Greece.
On the corporate front, Chesapeake Energy Corp. ( CHK ) is planning to raise $5 billion by selling off assets and issuing debt as well as stock in order to pay down borrowings and bolster production level. Specifically, Chesapeake will sell off 20% of its Appalachia unit, and part of its processing operations. It has also placed $600 million of non-voting convertible preferred stock with Temasek Holdings ( TEM ), a unit of Singapore's state investor as well as Hopu, a Chinese private equity firm. Both Temasek and Hopu have been given the option to place another $500 million worth of Chesapeake stock with other investors in Asia.
As for BP plc's ( BP ) continued struggle with the Gulf of Mexico oil spill, CEO Tony Hayward said that the company will try a second time to put another containment dome over the leaking oil well. A hearing about the offshore oil rig explosion April 20 that has led to one of the worst environmental disasters in the United States will start Tuesday on Capitol Hill. Contractors Transocean Ltd. ( RIG ) and Halliburton Co. ( HAL ) will join BP to testify before the Senate.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
