Phil Flynn: To Embargo or not to Embargo, That is Indeed the Question

While the market got a boost on reports that European refiners were meeting with Saudi Arabia and other oil producers and securing an alternative to Iranian oil supply, apparently some in the EU did not like the answers that they heard. An overbought oil market seemingly got a reason to sell-off on a Bloomberg report that the European Union embargo on imports of Iranian oil will likely be delayed for six months to allow countries such as Greece, Italy and Spain to find alternative supply, quoting an EU official with knowledge of the talks and it hit the market at just the right time.

The truth is, as I have said before, the EU would like to put off an embargo until after winter and Italy still wants some of the money that the Iranians owe them. Still do not think that Iran will be able to sell their oil very easily. The bottom line is that all Iranian oil will be sold, but it will be sold at a discount. Is it any wonder that Iran is rattling that saber to keep prices high. They are hopping if they can keep prices artificially high they won't miss the loss of revenue! Which means it will be a saber rattling kind of weekend! With a three day holiday in the US, being short over the weekend might be a dangerous propostion.
Yet Bloomberg News is reporting that.....Read the entire article.

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Phil Flynn: Jobs Baby Jobs!

Oh sure I can talk about Iran and The possibility of cracks showing in the EU oil embargo but let's face it today at least for awhile it jobs baby jobs! The oil market has been driven to and fro with a lot of bullish and bearish forces at play but the strength of the US jobs market will be the determining g factor as to wither we go higher or lower today. Oil was able to shake off a bearish Department of Energy Inventory report in part because there are worries about the resolve of Europe to embargo Iranian oil.

Other counties such as Japan and other Asian refiners are looking for alternative sources of oil which of course would be short term bullish. Yet with weak demand short term right now there is no fear that there will be a shortfall of oil. But back to the bullish word that China will imports a record amount of oil in 2012 as they look to rebuild and expand their strategic reserves. And on balance strong economic data in the US! Now the final piece of all of these forces will be Jobs, baby Jobs.

Reuters News Reported that " Japan's biggest refiner JX Nippon Oil & Energy Corp is talking with top exporter Saudi Arabia and other oil producers to source crude to replace any disruption to its imports from Iran, the company's president said on Thursday. Fresh U.S. sanctions on Iran over its nuclear program could make it difficult for refiners in Japan, Iran's number three crude buyer, to pay Tehran for its oil. Japan is seeking an exemption to U.S. sanctions that President Barack Obama signed into law on Saturday. The sanctions, if enforced, would penalize financial institutions for undertaking transactions with Iran's central bank, exposing the U.S. operations of Japanese banks that deal with Iran."

Bloomberg News Reported " The leader of financially struggling Italy questioned the scope and timing of a possible European Union halt to Iranian oil purchases, raising an obstacle to stiffer sanctions on Iran’s nuclear activities. Penalties set to be announced on Jan. 30 should be phased in and exempt crude sold by Iran to pay off debts to Eni SpA, Italy’s largest oil company, Prime Minister Mario Monti said. “An oil embargo is conceivable as long as it remains gradual and excludes the deliveries that serve to reimburse the billion euros in debts that Iran owes to Eni, our national company,” Monti told France’s Le Figaro in an interview published today.

Europe’s sanctions threat and an Iranian demand that U.S. warships stay out of the Persian Gulf have stirred new tensions between Iran and the West, contributing to higher energy prices. EU sanctions decisions require that all 27 member states go along. An oil supply dislocation might further damage the economies of Italy and Greece, two countries at the forefront of the European debt crisis. Italy is battling to get by without a bailout and Greece is seeking a second package.


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Phil Flynn: The Hopes and Fears!

The Hopes and fears of oil traders are met in the Euro Zone tonight! There is nothing like a good Spanish bond auction and a strong German consumer confidence number to get our minds off Mario Draghi. German confidence unexpectedly gained and Spain sold 7.4 billion dollars in T-bills in a successful bond auction with a reasonable yield of 1.735% on the three-month T-bills, down from 5.11% at the previous sale on Nov. 22, and it paid an average yield of 2.435%, down from 5.227%.

It is all about hopes and fears and that has been the dominate force driving oil this year and in recent days. The hopes that the Euro zone would step up to the table with a big bazooka to put the Euro break up fears to rest were dashed. Mario Draghi is a drag and is making it clear that a Euro bond is highly unlikely. Yet the German consumer confidence is showing that Europe might be more resilient than thought and downgrade fears might not be coming as fast and furious as previously thought .Dow Jones reports that Fitch Ratings says the 'AAA' rating on debt issues of the European Financial Stability Facility (EFSF) largely depends on France and Germany retaining their 'AAA' status.

The revision of the rating outlook on France to negative last Friday implies that the risk of a downgrade of EFSF debt has increased. We affirmed France's 'AAA' status but warned that that there is a slightly greater than 50% chance of a downgrade within the next year or two. This is therefore also the case for the 'AAA' ratings assigned to the EFSF's debt issues, unless additional credit enhancement mechanisms are introduced. The 'AAA' ratings assigned to EFSF debt issues rely on the EUR726bn of irrevocable and unconditional guarantees provided by the euro member states, and on the conservative guidelines the EFSF sets itself regarding debt management and liquidity risk.

Of the guarantees and over guarantees from 'AAA' rated member states, France and Germany provide EUR369.6bn, or over 80%. Although the EFSF could potentially remedy a downgrade of a small 'AAA' guarantor by increasing the size of its cash reserve or through additional credit enhancements, this would be far more challenging if a larger guarantor like France or Germany were downgraded. The primary source of ratings risk for EFSF debt issues is therefore the possibility that one or more of its largest 'AAA' guarantors is downgraded.

Oil may be also getting a boost from the Dow Jones report that, “Saudi King Abdullah is urging neighboring states to join in a formal Gulf union to confront what he called rising threats to their security and stability, as Gulf leaders convened to discuss regional uprisings and growing Arab worries over Iran. You must realize that our security and stability are threatened and we need to live up to our responsibilities," King Abdullah told the leaders of the five other nations of the Gulf Cooperation Council, gathered in Riyadh in their first annual GCC meeting since the Arab uprisings began. "

The Gulf's monarchies, emirates and sheikhdoms risked losing all if they failed to combine their efforts, Abdullah said. "So I ask you to go beyond the stage of cooperation, to a union in a single entity. King Abdullah gave no immediate public details of how he envisioned such a union taking shape, or operating. Gulf officials had said earlier that the two day meeting launched Monday would address greater cooperation in the military realm and others. The GCC comprises Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Oman and Bahrain.” Stay tuned.


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Crude Oil? Bah Humbug!

Oil traders need to get visited by the ghosts of Christmas oil trading past, present and future to get that holiday risk taking sprit. Remember those famous Christmas spikes on Iran rumors or when Russia cut off gas supplies to Europe? Yesterday oil traders acted like someone told them there was no Santa Claus the way they pulled in their bull horns and hid from risk.

This is despite the fact that all of the economic data that was released such as weekly jobless claims, the Empire State and Philly Fed Manufacturing numbers and good numbers from FED-EX, should have got the bullish juices flowing, yet after the blood bath the day before, kept traders cautious and fearful. Oh, some Scrooge may point out that the Industrial Production number had a lot to be desired but the preponderance of the evidence suggests that the US economy is indeed improving.

Of course we know what the problem is. The problem is Europe. Europe continues to miss opportunities to try to set the market straight as their aversion to stimulus and euro bonds is holding us back. You can be pro quantitative easing or anti quantitative easing but based on the US data, compare the US debt with record low yields against Europe with record high yields, at least for now quantitative easing seems to be working better than the European inflation aversion. Ben Bernanke may be smiling......Read the entire article.

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Phil Flynn: Taking The Embassy By Storm!

Occupy Tehran? Iranian students, incensed with a new round of sanctions, stormed the British Embassy and added a new dynamic to a market already concerned about the rising tensions in the Middle East. The orchestrated take over from the government was a clear violation of international law and shows Iran's utter lack of respect for anyone else in the world.

The pillaging of the UK Embassy had to have the support of the government because it is unlikely that without the government looking the other way, it would be impossible for a rag tag bunch of students to take over the fortified British compound. Iran, the world's fifth biggest oil exporter, was trying to stir domestic public outrage after a vote by Iran's leaders to end diplomatic relations with the UK and expel the British ambassador and the UK slapped sanctions on Iranian banks and their petrochemical companies.

Obviously these sanctions have some bite as it raised the acrimony of the Iranian regime. The outcome means that more than likely the U.S. will follow suit and put more pressure on the known terror state as it is clear to everyone that Iran is on track to secure a nuclear weapon after a report from the International Atomic Energy Association.

The likely hood of more sanctions against Iran look to tighten supplies of distillate in Europe and will put even more pressure on the world's newest diesel exporter, the US, to keep up with global demand. The United States, Russia, France, Britain and Germany all expressed outrage at the Iran, yet China remained quiet as it desperately needs diesel supply. They are fearful that if Iranian supply is cut it could lead to shortages in China for the coming winter......Read the entire article.


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Phil Flynn: Seven Days

It's now 7 days to fiscal sanity, or is it the alternative? It is do or die with an October 23rd deadline. A deal to save Europe which has to be done in seven days and France and Germany have to do the heavy lifting.

The G20 told the EU that they have one week to come up with a "comprehensive plan" that includes the details on how much of a haircut Greek bondholders will have to take and a plan to recapitalize all of the debt ridden European banks. It seems that all are agreed and Europe will be saved yet again.

Yet not so fast. Perhaps that 7 day deadline is not as hard and fast as the markets at first believed. Dow Jones said that German Finance Minister Schauble said the upcoming EU summit will not present an ultimate solution for the crisis. What?

The bottom line is that oil is living and dying with the twists and turns in this European nightmare. If Europe fails to come up with a viable plan then the word sinks back into crisis mode and the demand for oil will plummet.

Iranian revelations are also disturbing. Fears that perhaps this could escalate to some type of military conflict could keep some upward pressure on the Brent WTI spread.



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Phil Flynn: Bail Out Bonanza

Another day, another bailout and yes, bailouts are bullish! Another plan to save Europe and rising expectations of the US economy has oil back on an upward track. Oil got an initial bounce off of a jobs report that seemed to suggest that we are not in a recession. Yet after a surprise downgrade of Italy and Spain, oil took a late drop. Holy Fitch! Yet over the weekend German Chancellor Angel Merkel said that Germany and Spain have a plan to bail out European banks. Well at the very least they have a plan to make a plan and the details will be forthcoming. Huh? Well no matter, enjoy the ride!

Plus there are reports that the French-Belgian bank Dexia agreed to the nationalization of its Belgian banking division and secured 90 billion euros or $121 billion dollars in state guarantees. Now it appears that other banks in Europe will be backed by the governments in an effort to forestall an economic collapse. Bloomberg News reported that Angela Merkel and Nicolas Sarkozy turned their crisis fighting focus to banks, promising a recapitalization blueprint this month that will overtake a 12 week old rescue plan that has yet to be put into place. “We will recapitalize the banks,” the French president said in Berlin yesterday at a joint briefing with the German chancellor without providing details. “We’ll do it in complete agreement with our German friends because the economy needs it, to assure growth and financing.”

Of course the recent drop in crude oil price may cause some to change their long term demand forecasts and their outlook for future production capacity as well! The Saudis announced that they have put on hold their expansion of oil production capacity. The Saudis had planned to add another 2.5 million barrels of day of capacity to meet growing global demand. That would have the Saudi's production capacity at around 15 million barrels per day. The Wall Street Journal reported that Saudi Aramco Chief Executive Khalid Al Falih said, "There is no reason for Saudi Aramco to pursue 15 million barrels (of output capacity),"It is difficult to see (an increase in capacity) because there are too many variables happening," he said. "You've got too many announcements about massive capacity expansions coming out of countries like Brazil, coming out of countries like Iraq.

The market demand is addressed by others." He went on to say, "Our objective is not to grow our production for the sake of growing our production," Falih said, "but to be there for the market if the market needs it, and we are waiting to see what happens on the supply side as well as how demand stabilizes. Our planning horizons are in the decades and most of our investments are investments that will do very well at the end of an economic recession so we will pursue them ... regardless of what happens in Europe or in the U.S.," he said.

Now some peak freaks will claim the real reason is because the Saudis can't raise production because they are running out of oil. Yet the truth is that they are worried that an increase in capacity will put downward pressure on price at a time when global demand is faltering.


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Phil Flynn: United They Stand

United they stand, divided we fall and Greece's problems has Europe's back to the wall as divisions, divisions bring us down. So much for the euphoric rally on the hope and promise of a deal to meet Greece's debt obligations as divisions in the Euro Zone is stealing some of that incredible market momentum. This Greek tragedy continues to be a major driving force behind the value of oil and every stock and commodity around the globe.

The most obvious and direct impact on the price of oil is reflected in the value of the dollar. The day before yesterday when the market feared that a Greek default may lead to the end of the Euro Zone the dollar became the safe haven of last resort. The market feared that a breakup of the zone and a Greek default could create the same type of contagion mood the globe felt after the Lehman failure.

We see the market was predicting that an unmanaged Greek default would put the world into a deflationary downdraft. If Greece falls then what about Italy? Would they be next? How about Spain or Ireland? The market feared a freezing of the global economy and banking system as banks would refuse to deal with each other as they tried to determine their exposure to the Greek ruins.

Yet when the EU promised a deal that Europe would stand idly by while the world economy fell apart was well. Stocks and commodities soared across the board and the market now believes that there is no way that Europe would stand by while the global economic system fell apart.

In fact even a Financial Times report that said that a split over the terms of Greece’s second 109 billion Euro bail out developed wasn't enough to shake the confidence in the market that the EU would stand idly by while Rome or Athens burned. The FT said that" as many as seven of the bloc’s 17 members arguing for private creditors to swallow a bigger write down on their Greek bond holdings, according to senior European officials. The divisions have emerged amid mounting concerns that Athens’ funding needs are much bigger than estimated just two months ago. They threaten to unpick a painfully negotiated deal reached with private sector bond holders in July."

Still it did slow the buying as traders wait to see just what kind of deal would be done. We are still waiting.

The return of Libyan oil to the export market brought it the Brent/wti spread. We may have topped of course beware of a quick pop on positive bailout news. The API reported That crude oil increased by 568,000 barrels! Of Course the EIA should show a much larger increase as it catches up with the AP!.The API also showed a massive 4.63million barrel build in gasoline supply. Is anybody driving anymore?

We still feel the low for WTI oil is in for the year but we are nervous!

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Phil Flynn: Prime The Pump And Bailout The Brent

Oh sure, now you go and bail out Europe and drive the Brent Crude versus West Texas Intermediate spread back above $25 wide! Brent crude gets pumped up as global central bank pumps dollar liquidity in to European banks. The reduced risk of bank default and kicking the Greece default can further down the road had the Brent crude supply demand fundamentals tightened in a minute.

The decision of the five largest central banks to dump dollars into European banks added to the support for oil but created fears of a tightness of supply in the Brent. Weak production from the North Sea and conflicting reports on the return of Libyan crude seems to be adding to the Brent woes. There is some short term confidence coming out of the Euro zone and this will increase demand or at least expectations of demand almost instantly.


The spread between Brent crude and West Texas had previously come in, especially after U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum reserve) fell by 6.7 million barrels which put US supply at 346.4 million barrels which is still well above the five year average.


Robert Campbell of Reuters News says writes, "Looking back at the impact of the Libyan civil war on the oil market the most remarkable fact is that the situation did not lead to an oil super-spike. After all, a scramble for sweet crude in 2007 is widely seen as the trigger for the spiral in oil prices until they hit nearly $150 a barrel. Although the data are still coming in, it would appear that the Atlantic basin refining sector is now more flexible, in part due to weaker demand and in part due to investments in new capacity. Sweet refiners may be suffering because of high crude costs, but the system as a whole is not breaking down."

He goes on to say, "The resilience of the market is all the more impressive once the other supply disruptions to the European short haul sweet crude market are considered. Normal decline of the aging fields in the North Sea is well known, as is the extraordinary sequence of problems at several important production facilities in the area. Less discussed is the reduction in crude oil production in Azerbaijan, an important supplier of very low sulfur crude.

Combined with the conflict in Libya a huge amount of sweet crude oil production was lost to European refiners, many of which rely on short haul cargoes. In the first half of the year sweet crude output from Azerbaijan, Britain, Libya and Norway was 215 million barrels less than in 2010. With this number in mind, the response of the International Energy Agency to the crisis.....a release of 60 million barrels of strategic stocks, seems almost timid. Doubtless, the IEA would argue that the problems in Azerbaijan, Britain and Norway were not the classic supply disruptions the agency is meant to guard against."


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Phil Flynn: A Study In Contradictions

It's no wonder that oil is on track to have one of its flattest trading years since 2003. The last minute late November sell off was another sign that the bulls and bears lack true conviction as they to make sense of some obvious and some obscure fundamentals that are driving the price in this somewhat wide swinging emotional oil market. In fact the trading swan song for November and the first of December snap back really symbolizes omneity of the entire year in the oil market. In a normal time, better than expected readings on U.S. Manufacturing and consumer confidence might inspire an oil rally. You might think that oil would celebrate the fact that business expanded at a faster pace than thought for as the Institute for Supply Management-Chicago Inc. rose to 62.5 the highest since April from 60.6 in October increasing hopes that manufacturers would hire and invest in new equipment as their business booms.

Or perhaps the market might take heart from the fact that consumer confidence soared to a reading of 54.1, the highest level since June in the heart of the Christmas shopping season. Yet with the dark clouds emanating out of Europe and commodity funds getting frustrated with their $100 barrel oil bets, prices drove lower as funds wanted to take what profit incentive fees they could before they go flat for the holiday and start shopping for that GI Joe with the Kung-Fu grip for their kids. That was the case even as the dollar rallied, capping off a month where the dollar rallied off its QE2 lows hitting the highest levels since the Fed hinted that they would print more money as investors seek shelter from economic storm clouds in Europe. The oil bulls lost their moxie as risk in the......Read the entire article.

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Phil Flynn: Happy Thanksgiving!

Well I guess we have one thing to be thankful for this Thanksgiving, oil prices are coming back down. All right it’s something and it was hard to find that silver lining especially after the week that we have had. It seems the world has gone crazy and there are new risks around every corner and these risks have conspired to bring oil prices back down.

Now can you enjoy your turkey? It was only weeks ago that oil bulls were basking in the intoxication of the Fed’s Quantitative Easing the sequel. The oil market topped $88.00 a barrel, it was a suckers rally as the market felt confident that all was well as the Fed had the markets' back. What was there to worry about? Tell after the Fed minutes we find out there is plenty to be worried about. The Fed’s grim economic outlook and a sense that perhaps some members of the Fed are questioning fed policy, have helped reduce some oil trader’s optimism about QE2 inspired oil demand.

The Fed lowered its forecast for 2010 GDP down to 2.4 to 2.5% from their previous estimate of 3 to 3.5%. For 2011 they expect GDP between 3% and 3.6%, down from 3.5% to 4.2% previously. As far as 2012 when the market expects rates will finally increse GDP projection is little changed while the new 2013 projection is put at 3.5-to-4.6%. The Fed also downgraded expectations for the unemployment rate which were raised for 2011 to a rate, 8.9% to 9.1% is expected. In 2013, the jobless rate is still seen between 6.9% and 7.4%.

What’s even more of a concern is the members of the Fed may not be on board with all of the printing of money. The Fed Minutes said that participants......Read the entire article.


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Phil Flynn: Crude Oil Is Shell Shocked

North Korea’s shelling of a South Korean Island is raising fears of a global catastrophe and the impact on oil might be dramatic. Overnight in what is being called the most aggressive attack since the Korean War Cease fire back in 1953 North Korea's shelling of South Korea is shaking up global commodity markets. Oil prices are falling with traders seeking safe haven in the US dollar as they wait and try to figure out just what the heck is behind North Korea's aggressive action. North Korea, without provocation, decided to shell a South Korean Island and as reported by the New York Times.

“North and South Korea exchanged artillery fire on Tuesday after dozens of shells fired from the North struck a South Korean Island near the countries’ disputed maritime border. Two South Korean soldiers were killed, 15 were wounded and three civilians were injured", said Kiyheon Kwon, an official at the Defense Ministry. Reuters News reported, “South Korea has warned North Korea it would “sternly retaliate” to any further provocations. There may be a lot of reasons for North Korea’s action. Perhaps it is because their secret nuclear weapons facility was exposed. That led to reports that South Korea’s defense minister saying that South Korea might again might hoist......Read the entire article.




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Phil Flynn: Ben Versus The Dragon

The Chinese moved to increase interest rates and Big Ben Bernanke struck back defending quantitative easing and bashing the Chinese. Ben forced the issue with QE2 and now the Chinese are forced to raise rates! Now the question is will the Chinese rate hikes keep coming or will it be too little too late to cool their hot inflation? Right now I would say it’s bordering on too little too late. Ben Bernanke lashed out at China saying they are causing global problems by preventing their currency from strengthening while their economy booms.

It’s just like what I said in my article in the upcoming issue of SFO Magazine when I wrote, “The Fed felt it had no choice (but to print more money,QE2) as the U.S. government moved slow to attack a rising budget deficit and at the same time face an imbalance as the Chinese continue to manipulate their currency." Chinese currency manipulation may help them in the short run yet it could sow the seeds of economic problems in the future.

The Chinese may feel that they have to cheat the world to be successful by controlling their currency but the truth is that if they want to maintain their meteoric economic growth over the long run they would be better served by allowing the market, not the government, to moderate their economy. Chinese currency manipulation is creating a bubble that will burst if they make a misstep, causing major pain the future. Right now that may be hard to imagine as everyone on the globe is so bullish on China yet the recent correction and history is a reminder that things can......Read the entire article.


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Phil Flynn: QE2 Or Not To QE2 That Is The Question

While the Fed printing presses continue to roll interest rate worries are seemingly dominating the direction of the oil market. While the Federal Reserves prints more money rates continue to raise giving surprising strength to the dollar and putting downward pressure on oil. The Chinese stock market got hammered overnight after The Bank of Korea worried about inflation raided their base interest rate by a quarter points to 2.50%. The move means that more than likely China will not be too far behind as countries across Asia are reacting to a major onslaught of inflationary pressures.

In the mean time the markets are focused on the problems in Europe. EU members want Ireland to take their money as they fear that Irelands debt problems could spread to other countries. Ireland ion the other hand says that they are fine and is telling the EU that they do not need their help. Yet the EU feels that the fallout from Ireland’s debt could drive up borrowing costs in other PIIG countries especially Portugal, Italy and Spain. The EU is saying please take the money. Of course all of this global intrigue is impacting the......Read the entire article.

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Phil Flynn: G-20 And The Price Of A Barrel

Crude oil hit a two year high as US product and oil exports soar, but perhaps the eventual fate of oil and its price level really will be determined by the action or the inaction from the G-20 nations. Imports and exports will be on their mind as China and the US are at a standoff as to whose policies are a bigger threat the global economic recovery.The Chinese really love QE2 because it really takes the focus off of them for being the only currency manipulator.

Of course the Chinese policy of restraining their currency may help them in the short run but it could also be the seeds of their economic problems in the fore. The Chinese may feel that they have to cheat the world to be successful by controlling their currency, but the truth is if they want to maintain their meteoric economic growth over the long run, they would be better served by allowing the market not the government to moderate their economy.

The truth is that the Chinese current manipulation is creating a bubble in their own economy that will burst at some point in the future. And eventually cause major pain for them in the future. Right now of course that may be hard to imagine as everyone on the globe seems to be so bullish on China that they cannot see the major flaw in this story that is staring us right in the face.

The risk of their bubble bursting is increasing everyday yet they refuse to allow their currency to float. You seein a way the Chinese currency manipulation was just as much a factor in the global economic meltdown as was the Fed and the US government’s ill fated Fannie and Freddie excesses......Read the entire article.

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Phil Flynn: Dollar Drubbing And Hot Commodities!

QE2 anger around the world continues to grow leading one to wonder if someone in the world might want to say that the United States is a currency manipulator. How will the Chinese get even with us for our dollar printing ways? Well the easy answer is to just buy more commodities. The hot money is pouring in as the dollar gets wacked and commodities take off again. Hedge funds bullish positions in oil hit a 4 year high as they have no other choice but to react to the bullish actions of the Fed. No one should blame speculators for driving up prices because the Fed gave the hedge funds no choice. The Chinese have no choice either as the Fed action may force them into another commodity buying binge.

The Chinese are already stockpiling oil and panic buying in cotton and other commodities may start to take the place of buying US debt. Why lose money on a deckling dollar when you can make money holding gold, silver or corn! There is also some concern on the Brent side that North Sea crude production could fall. Short report today due to computer issues. Still you can always get the latest news by calling me at 800-935-6487 or email me at pflynn@pfgbest.com . You can also catch Phil on the Fox Business Network where you can see him every day!


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Phil Flynn: I Was Dreaming When I Wrote This

Forgive me if it goes astray, but when I woke up this mornin', could sworn it was judgment day. The sky was all purple, there were bulls running' everywhere. Trying' to run from the destruction, you know they didn't even care. 'Cuz they say the QE2 billion zeros printed party started, oops out of time! So tonight I'm gonna party like it's 1929. I was dreaming' when I wrote this, the markets ran so fast, but commodities are just a party, and parties weren't meant to last, there is danger all around us, my mind says prepare fly, but for now we must enjoy it and party like its 1929. Yeah, everybody's got a printing press and we could all die any day. But before I'll let that happen, I'll dance my life away. So tonight we gonna, we gonna (Tonight I'm gonna party like it's 1929) Say it 1 more time

Two trillion dollars printed. Oops out of time. No, no. So tonight we gonna, we gonna (Tonight I'm gonna party like it's 1929). Let's get this party started! The Fed is coming out so let’s get this party stared! Forget about the Fed taking away the punch bowl, let’s face it they are trying to get everybody drunk and wow what a party! Remember when the Fed thought that irrational exuberance was a bad thing? With QE2 they want to get us woozy and keep us feeling that way. Of course sometimes when you are drunk you kind of forget about the consequences of the hangover when you wake in the morning.

Stocks hit two year high the highest level since Lehman brothers went belly up. Gold hit a record high! Oil is at the highest level since April! Silver soars! Beans trying for the teens! Forget about tomorrow, live for today and just keep drinking and don’t worry about the consequences. Just as long as we don’t have to wake up. Hyper Inflation! Forget about it! Struggling consumers racked with unemployment and food and energy bills! Who cares! How about deflation in......Read the entire article.



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Phil Flynn: Crude Oil After QE 2

People are finally starting to get it. And that is that the Federal Reserve policy moves markets and that quantitative easing drives up the price of oil. Most had never heard the term "quantitative easing" when the Fed made their move to print money the first time in March, 2009. The Fed made this move to try to save the economy from what they thought was leading us to a deflationary depression. For those of you who still need enlightening, quantitative easing is basically the monetary policy of last resort. When even zero percent interest rates fail to generate economic activity, the central banks flood the banks with excess cash reserves by buying back paper debt the banks hold with freshly printed money.

The hope is therefore, that these banks will in turn lend that freshly printed money to businesses and you and I, who in turn will expand and spend, thereby, hopefully, hire people and create more jobs. It also hopes to take away that deflationary mood by devaluing the U.S. dollar making commodities more expensive. Quantitative easing by the Fed is the greatest economic story of modern times. Back in 2009 when I tried to explain this concept, many looked at me as if I was from outer space. QE was a mystery to them and all they could figure was it was those evil oil and commodity speculators that were driving up prices. Prominent oil bulls went as far as saying the value of the dollar had nothing to do with the value of crude.

They seemed to believe that the sudden surge oil was due to the world hitting its peak ability to get oil that was running out. Others railed against speculators saying they caused the run up in prices yet failed to mention the dollar or the financial crisis when they spewed their diatribe to anyone who would listen, even Congress. Now of course the world is more familiar with the inflationary impact of quantitative easing. In fact if they were not, well they got a crash course after the last Fed meeting......Read the entire article.


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Phil Flynn: Giving OPEC Too Much Credit

When Ali Naimi speaks the markets listen but should they? Some gave credit to yesterday’s big rally in oil to comments by the “Alan Greenspan” of oil, the de facto leader of the OPEC cartel, Ali Naimi, who said that oil was in a comfortable range between $70 and $90. Some took that to mean that Mr. Naimi was hoping for 90 barrel oil. Or could it be that oil rallied because China’s data was stronger than expected. Or could it have been the the Federal Reserve and their major money printing binge. The truth is that oil popped on the data and gained more strength on the reports of the bomb going off in Athens, Greece.

OPEC is not the driving force in the oil market. In fact the man that the oil market listens to is Ben Bernanke and not Ali. Mr. Naimi's impact, like Greenspan's, is in the past not the present. Oil of course also listens to the Forex market. Overnight the Aussies shook up the global markets by a “pre-emptive” 25 basis point rate hike 4.75% its first rate increase since May. Natural gas prices lost ground. The main reason was that oil was higher.

The natural gas versus crude spread was very evident. Of course the fact that we have a global glut of gas may have weighed on market sentiment as well. Reuter’s News reported that according to the International Energy Agency the globe has a natural gas glut that could last for a decade. Reuters says that, “An existing natural gas glut could run for as much as 10 years, Nobuo Tanaka, executive director of the International Energy Agency (IEA) said on Monday.

”If we assume the current level, the gas glut may go on for as long as 10 years, but there is uncertainty about how strong demand will be from China, so it could be much shorter," Tanaka told reporters in Singapore, where he is attending an industry meeting. Qatar, the world's largest exporter of liquefied natural gas (LNG), said earlier it expected the global gas glut to end......Read the entire article.


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Crude Oil Advances to a Two Week High on Chinese Expansion, U.S. Stimulus

Crude oil increased to a two week high after Chinese manufacturing expanded at the quickest pace in six months and on expectations the Federal Reserve will announce measures this week to stimulate the U.S. economy. Oil rose 1.9 percent as China’s Federation of Logistics and Purchasing said the country’s purchasing managers’ index climbed to 54.7 in October. The Fed may make more asset purchases, known as quantitative easing, after its meeting Nov. 2 to Nov. 3. An industry report showed that U.S. factory output expanded more than forecast last month.

“The combination of the strong Chinese data and expectations for quantitative easing this week, is giving traders good reasons to be long,” said Phil Flynn, vice president of research at PFGBest in Chicago. Crude oil for December delivery rose $1.52 to $82.95 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 18. Prices are up 7.7 percent from a year ago. Brent crude oil for December settlement increased $1.92, or 2.3 percent, to $85.07 a barrel on the London based ICE Futures Europe exchange.

The Standard & Poor’s 500 Index advanced 0.2 percent to 1,185.70 at 2:31 p.m. in New York, and the Dow Jones Industrial Average increased 0.2 percent to 11,142.82. The reading in the logistics federation’s PMI in China compared with 53.8 for both the previous month and the median forecast of 13 economists surveyed by Bloomberg News. The country overtook the U.S. last year as the biggest energy user......Read the entire article.



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