With all else around it declining oil prices held steady on Wednesday
and into today on one of those unforeseen geopolitical event in the
middle east... Israel struck Gaza killing the top Hamas military leader.
In a region that has been very unstable for a long time this just adds
another layer of instability. Israel may be striking Hamas as they
engage in a bit of a proxy war with Iran... a major supporter of Hamas.
Now that the US election is over the Israeli's may be at the early
stages of positioning themselves to get more aggressive in trying to
destabilize Iran's nuclear program and yesterday's strike against Iran's
proxy in the region could be just the beginning.
The gain in
oil prices over the last twenty four hours was not significant based on
the magnitude of the gains historically when these type of event takes
place. The fact that the global oil market is well supplied has
minimized the reaction in the oil pits. In addition until there is a
clear sign that the instability in the region is spreading toward the
oil producing states market participants are likely to approach this
situation with caution and not overreact to the upside. That said as
long as the tensions and military activity continues to evolve oil
prices should find some price support in the short term. The markets
will be watching how Obama handles what has been a strained relationship
with Israel over the next several weeks. Based on the action by the
Israeli's it suggests that they are not overly concerned as to the US
reaction at the moment.
Back to the negatives impacting oil
prices today the latest data out of the euro zone shows that the EU is
now officially in a recession as it now has two quarters in a row with
negative GDP. The latest Eurostat data showed third quarter GDP came in
at negative 0.1% after declining by 0.2% in the second quarter. Even the
main economic growth engine of the EU... Germany saw its third quarter
GDP gain slip to 0.2% from 0.3% in the second quarter. On the other end
of the spectrum Greece's economy contracted for the seventeenth quarter
in a row. Even more directly related to the energy sector industrial
production in the EU dropped by 2.5% in September (versus August) or the
largest monthly drop in over three years.
In Asia as a new leader comes to power in China...The MaxSonar ultrasonic sensor
offers very short to long-range detection and ranging. the main
economic growth engine of the world is certainly not humming along
rather it is continuing to ride a very bumpy and uneven road. Data out
of China overnight showed non-performing loans rose by $3.6 billion
dollars...Find detailed product information for howo spare parts
and other products. the fourth straight quarter of increase and the
longest streak since at least 2004 (according to a Bloomberg
article).This document provides a guide to using the ventilation system
in your house to provide adequate fresh air to residents. This data
strongly highlights that the Chinese economy is also weakening and not
yet ready to lead the global economy out of the current malaise as it
did after the major downturn in 2008.
Global equity markets have
been very reflective of the economic uncertainly as most markets around
the world were hit with a strong round of selling over the last twenty
four hours. The EMI Index lost another 1.4% since yesterday narrowing
the year to date gain for the Index to just 3.5% or back to the level it
was at in early August. Three of the ten bourses in the Index are now
in negative territory for the year...China, Brazil and Canada while
Germany and Hong Kong are still showing double digit gains for the year.
Since the US election the US Dow has lost about 5% of its value as
President Obama continues to focus on raising taxes at a time when the
US economy is continuing to weaken. Needless to say global equity
markets as a leading indicator for the global economy are painting a
bearish picture for all financial markets as well as for oil and the
broader commodity markets.
With the global economy and oil
fundamentals continuing to be the main focus of the trading and
investing community this week's oil inventory report could be a price
catalyst especially if the actual outcome shows a large deviation from
the projections. However,A stone mosaic
stands at the spot of assasination of the late Indian prime minister.
any inventory reaction could be short lived if the macroeconomic data,
the fiscal cliff and Greece remain the main focus of most market
players.Thank you for visiting! I have been crystal mosaic since 1998.
My
projections for this week's inventory report are summarized in the
following table. I am expecting the US refining sector to increase
marginally as the refining sector continues to return to normal from the
recent storm on the east coast. I am expecting a modest build in crude
oil inventories, a build in gasoline and another draw in distillate fuel
stocks as the weather was colder than normal over the east coast during
the report period. I am expecting crude oil stocks to increase by about
2.3 million barrels. If the actual numbers are in sync with my
projections the year over year comparison for crude oil will now show a
surplus of 40.1 million barrels while the overhang versus the five year
average for the same week will come in around 45.2 million barrels.
I
am expecting a modest draw in crude oil stocks in Cushing, Ok as the
Seaway pipeline is still pumping and refinery run rates are continuing
at high levels in that region of the US. This would normally be bearish
for the Brent/WTI spread in the short term but the spread is currently
trading at a relatively high premium to Brent but off of the highs hit
about a week or so ago. The slow return from maintenance in the North
Sea has been the main driver that has resulted in the Nov Brent/WTI
spread now trading over the $23/bbl level as of this writing. The
widening of the spread should begin to ease once the North Sea returns
to a more normal production level.
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