Phil Flynn: Meeting Madness

Meeting or no meeting West Texas Intermediate (WTI) oil continued to fly and the spread between the Brent crude continued to come in. The upward momentum in WTI was slowed a bit when European finance ministers sent chills down trader's spines. With the Euro Zone in termoil it is another reason why the WTI/ Brent spread has come in recent days.

The other reasons are as follows:
The market is pricing in the faster than expected return of Libyan crude. We continue to get reports from Libya that the damage to some of the major oil and gas fields are not that bad and the market expects production to ramp up quickly. The price of Brent was pricing in some worst case scenarios for the return of Libyan crude.

The other reason is that we have seen the spread come in is because of the continued decline in stocks of crude in Cushing, Oklahoma since the beginning of this conflict. In April Cushing stocks were at 41.9 million barrels in the beginning of the conflict and are now close to 31.1 million. That was ok when we thought the US was sinking into recession but now the US will have to see a higher price for WTI if we are going to be competitive for imports.

The other reason is that the Fed is laying the groundwork for QE3D! That will support oil as it has the gold and the silver markets.

The market will focus on Europe today but also the weekly supply reports from the Energy Information Agency. The API reported crude oil stocks up 2.7 million barrels. Gasoline up 153,000. Distillates down 1.8 million barrels. Stay tuned.

Phil Flynn

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Crude Oil Rises On Hopes of Euro Zone Deal

Crude oil futures rose Friday amid high hopes going into a weekend summit of European leaders working to resolve the sovereign debt crisis, following equities and the euro higher.

Prices jumped as trading opened in New York and were up as much as 3% in midmorning trade before settling back. Light, sweet crude for December delivery ended the day up $1.33, or 1.6%, to $87.40 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled 20 cents lower, or 0.2%, to $109.56 a barrel.

Traders and analysts said the market rose on the belief that European leaders will finally put forth a comprehensive settlement to the European credit crunch that has plagued markets on and off for the last year and a half. Government and finance officials were to hold a series of meetings in Brussels this weekend; French President Nicolas Sarkozy and German Chancellor Angela Merkel issued a joint statement saying they would put forth a plan by Wednesday......Read the entire Rigzone article.


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