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Crude oil is still staying in tight range as consolidations continues. Upside momentum is clearly diminishing with bearish divergence condition in 4 hours MACD. But still, another rise is in favor as long as 80.16 minor support holds. Current rally might still extend further for retesting 83.95 high. However, break of 80.16 minor support will argue that a short term top is already formed. In such case, deeper pull back should be seen to 38.2% retracement of 69.50 to 83.03 at 77.86 and below.
In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 69.50 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish..... Nymex Crude Oil Continuous Contract 4 Hours Chart
Crude oil closed higher on Wednesday as it consolidates above the 75% retracement level of the January-February decline crossing at 81.63. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are overbought, diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term. If May extends the rally off February's low, the 87% retracement level of the January-February decline crossing at 83.53 is the next upside target. Closes below the 20 day moving average crossing at 79.53 would confirm that a short term top has been posted. First resistance is today's high crossing at 83.36. Second resistance is the 87% retracement level of the January-February decline crossing at 83.53. First support is the 10 day moving average crossing at 80.79. Second support is the 20 day moving average crossing at 79.53.
Natural gas closed higher due to short covering on Wednesday as it consolidates some of this winter's decline. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.157 is the next downside target. Closes above the 20 day moving average crossing at 4.974 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.715. Second resistance is the 20 day moving average crossing at 4.974. First support is today's low crossing at 4.512. Second support is weekly support crossing at 4.157.
The U.S. Dollar closed lower on Wednesday as it extends the trading range of the past five weeks. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 79.92 are needed to confirm a downside breakout of the aforementioned trading range and would open the door for a larger degree decline into spring. If June renews this winter's rally, weekly resistance crossing at 81.97 is the next upside target. First resistance is the reaction high crossing at 81.70. Second resistance is weekly resistance crossing at 81.97. First support is last Wednesday's low crossing at 80.14. Second support is the reaction low crossing at 79.92.
Every Wednesday, spot crude oil traders look to one the most significant fundamental data pieces; the weekly crude oil inventories report. The crude oil inventories report has the ability to sway the price of spot crude oil to a new swing high, or a new session low.
The crude oil inventories report that is released by the U.S. Energy Information Administration can move the price of spot crude oil on average of $1.90 the day the report is released. But the direction of the price move varies. The change in price is not dependant on higher or lower inventory numbers, nor is it dependant on the levels of gasoline or other distillates that the report measures. We would expect that a lower level of crude oil inventories would help to increase the price of spot crude oil. However, there is no significant trend correlation between the price direction and the release of the report, telling traders in which direction the price will move, up or down. We do know that price volatility is typically higher the day the report is published.
When trading spot crude oil during the release of the crude oil inventory numbers, traders also need to be looking at the direction of the general price trend of the commodity. Traders should also be tracking other markets that can significantly influence the price of spot crude oil. The movements of the U.S. dollar and crude oil typically have an inverse relationship; as the USD strengthens, the price of spot crude oil falls. The opposite is true in relation to the S&P 500. As the value of the U.S. stock index rises, so does spot crude oil prices.
This is only a small list of the factors that can affect spot crude oil trading. Traders need to make sure they are taking in all relevant information when trading spot crude oil. The EIA crude oil inventories report is a significant factor, but certainly not the only influencer on the market.
Crude oil fell from an eight week high after a government report showed that U.S. inventories climbed for a sixth week, the longest stretch since May.
Stockpiles rose 1.43 million barrels to 343 million in the week ended March 5, according to the Energy Department report. Imports tumbled 8.1 percent to an average 8.49 million barrels a day, the biggest one week drop since October.
Crude oil for April delivery fell 13 cents to $81.36 a barrel at 12:25 p.m. on the New York Mercantile Exchange. Futures reached $83.03, the highest level since Jan. 11.
Brent crude for April delivery declined 35 cents, or 0.4 percent, to $79.56 a barrel on the London based ICE Futures Europe exchange. Futures touched $81.46, the highest level since Jan. 11.
From Mark Shenk at Bloomberg news. You can contact Mark at mshenk1@bloomberg.net.
Intraday bias in Crude oil remains neutral for the moment as consolidation from 82.41 continues. Another rise is still mildly in favor with 79.75 minor support intact and above 82.41 will target a retest on 83.95 high. However, considering bearish divergence condition in 4 hours MACD, break of 79.75 support will indicate that a short term top is formed and will bring deeper fall to 38.2% retracement of 69.50 to 82.41 at 77.48 next.
In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 69.50 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart
Crude oil closed lower due to profit taking on Tuesday but remains above the 75% retracement level of the January-February decline crossing at 81.63. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought, diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term. If May extends the rally off February's low, the 87% retracement level of the January-February decline crossing at 83.53 is the next upside target. Closes below the 20 day moving average crossing at 79.18 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 82.82. Second resistance is the 87% retracement level of the January-February decline crossing at 83.53. First support is the 10 day moving average crossing at 80.58. Second support is the 20 day moving average crossing at 79.18.
Natural gas closed lower on Tuesday as it extends this winter's decline. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.157 is the next downside target. Closes above the 20 day moving average crossing at 5.009 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.744. Second resistance is the 20 day moving average crossing at 5.009. First support is Monday's low crossing at 4.525. Second support is weekly support crossing at 4.157.
The U.S. Dollar closed higher due to short covering on Tuesday as it extends the trading range of the past five weeks. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 79.92 are needed to confirm a downside breakout of the aforementioned trading range and would open the door for a larger degree decline into spring. If June renews this winter's rally, weekly resistance crossing at 81.97 is the next upside target. First resistance is the reaction high crossing at 81.70. Second resistance is weekly resistance crossing at 81.97. First support is last Wednesday's low crossing at 80.14. Second support is the reaction low crossing at 79.92.
Oil prices are under a bit of pressure to start the day as attention turns again to the forex markets. Comments from China about their currency and their foreign exchange reserves are capturing the attention of traders across the commodity spectrum. Is it possible that the Chinese are on the verge of letting the Yuan appreciate for the first time since July of 2008?
Market Watch News reported that Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency exchange policy, indicating Beijing doesn't plan to keep the Yuan’s de-facto peg to the U.S. dollar indefinitely. These comments, as well as comments surrounding their reserves are giving a boost to the dollar and helping to bring inflated oil back down to earth. Oil prices have been supported by China in many ways and we are just not talking about demand.
China’s peg to the dollar, or should we say re-peg to the dollar, has created an excess of printed Yuan’s. The Chinese re-pegged their currency to the dollar as the rising Yuan caused China to lose manufacturing jobs as their exports became more expensive. So China went back to its tried and true formula of pegging its currency to the dollar.
hinese’s stimulus, along with the dollar peg, has created the perfect scenario for the Chinese to buy more oil driving up the price and doing no favors to the strength of the green back. The Chinese peg is another weight on the dollar making oil more expensive in dollar terms. Obviously if China lifts its dollar peg this will be bearish for oil, the question is how bearish. Well that depends how much room they give the Yuan to float and when. Gov Xiaochuan says, "Sooner or later, we will exit [these] policies. Of course maybe that means sooner rather than later.
IFAOnline says that China could end its near two-year currency peg on the dollar as soon as next month, according to respected economist Professor Nouriel Roubini. They say that Prof Roubini believes the Beijing government will authorize a 2% increase against the dollar initially, followed by a further 1%-2% strengthening over the next 12 months. "They will move by a token amount. The world is much cloudier in every dimension. They are super cautious."
Also comments about the Chinese appetite for gold may have an impact on commodities. Market watch reported that China's appetite for gold as a way to diversify its foreign exchange reserves is limited because of the metal's poor returns over the past 30 years, the nation's foreign exchange regulator was cited as saying in a report Tuesday. (What, doesn’t he believe G. Gordon Liddy?) Marketwatch says that Yi Gang, director of China's State Administration of Foreign Exchange, said China's gold reserve, at 1,054 metric tons, was the fifth-largest in the world, Dow Jones Newswires reported, citing comments by Yi at a press conference at the National People's Congress.
But Yi downplayed any desire to add the holdings as a strategy to diversify the nation's $2.4 trillion foreign exchange stockpile. "Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold," Yi was quoted as saying. A precursor to another China purchase perhaps? These types of stories are a reminder how the commodity bull market is built on shaky ground. When you build a base on printed money and central bank currency pegs, we know it creates bubbles that can easily burst. Make sure you get out before it does.
You can contact Phil at pflynn@pfgbest.com And as always catch him every day on the best in business news in town, the Fox Business Network.
Crude oil declined for the first time in three days as the dollar gained against the euro, reducing the appeal of commodities as an alternative investment. Oil slipped as much as 2.1 percent after the euro weakened amid concern that the Greek financial crisis will trigger a default on debts by other European countries. Prices also dropped on forecasts that a government report tomorrow will show U.S. oil supplies increased last week.
“There’s a healthy amount of skepticism about both the global economic situation and sovereign debt problems in Europe,” said John Kilduff, a partner at Round Earth Capital, a New York based hedge fund that focuses on food and energy commodities. “This is leading to the revival of the dollar as a safe haven, which is hitting oil.”
Crude oil for April delivery fell 90 cents, or 1.1 percent, to $80.97 a barrel at 11:05 a.m. on the New York Mercantile Exchange. Yesterday, the contract rose 37 cents to $81.87, the highest settlement since Jan. 11.
Oil, equities and the dollar have rebounded from a year ago, when the Standard & Poor’s 500 Index fell to its lowest level since the collapse of Lehman Brothers Holdings Inc. Oil is up 72 percent, and the S&P Index has risen 68 percent since March 9 last year.
The greenback traded at $1.3573 per euro, up 0.4 percent from $1.3634 yesterday. It was the first increase in three days. “Economic concerns are hitting the oil market,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “Worries about sovereign debt in Europe are seeping into the market and giving the dollar a boost”.....Read the entire article.
The move down in gold yesterday surprised many traders and flashed an exit signal based on MarketClub's daily "Trade Triangle" technology. As we have mentioned before, we felt that gold was in a broad trading range and were not optimistic that it would shoot higher.
The action yesterday confirms that we have more of a two way market. We expect we'll see further selling on any rallies from this level.
Just click here to watch today's video, where we'll share with you some thoughts we have on gold based on one important element: how gold energy fields propel this market.
Please feel free to leave a comment letting us know what you think of the video and the direction of this gold market.
Crude oil's retreat from 82.41 extends further today. considering bearish divergence condition in 4 hours MACD, break of 79.75 support will indicate that a short term top is formed and will bring deeper fall to 38.2% retracement of 69.50 to 82.41 at 77.48 next. Nevertheless, before that, another rise could still be seen and above 82.41 will target a retest on 83.95 high.
In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 69.50 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.
Crude oil closed up $0.31 at $81.81 a barrel today. Prices closed nearer the session high today and hit another fresh two month high. Crude oil bulls have the solid overall near term technical advantage. The next upside price objective for the bulls is producing a close above solid technical resistance at the January high of $84.96 a barrel.
April natural gas closed down 5.8 cents at $4.535 today. Prices closed near the session high today and hit another fresh contract low. Bears have the solid overall near term technical advantage. Prices are in a 10 week old downtrend on the daily bar chart. The next upside price objective for the bulls is closing prices above solid technical resistance at $5.00.
The June U.S. dollar index closed down 5 points at 80.69 today. Prices closed nearer the session high today. Trading has turned choppy. The bulls still have the overall near term technical advantage. Prices are still in a three month old uptrend on the daily bar chart.
Crude oil fluctuated along with equities as energy traders looked to stocks for signals of the strength of the economic recovery and fuel demand. Oil traded in a $1.66 range as stocks drifted between gains and losses after American International Group Inc. rose on the sale of a unit while drugmakers sank as President Barack Obama embarked on a final push to overhaul the health care system. An Energy Department report on March 10 will show that U.S. crude supplies climbed last week, a Bloomberg News survey showed.
“Until we get some solid statistics from the DOE on Wednesday, the market will look at equities for direction,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. Crude oil for April delivery rose 19 cents to $81.69 a barrel at 1:43 p.m. on the New York Mercantile Exchange. Futures touched $82.41, the highest level since Jan. 11. Prices are up 79 percent from a year earlier.
The Standard & Poor’s 500 Index gained 1.76, or 0.2 percent to 1,140.46. The Dow Jones Industrial Average increased 0.68 point to 10,566.88. “We are bouncing around with equities,” said Addison Armstrong, a director of market research at Tradition Energy in Stamford, Connecticut. “Crude oil is very much a follower and not trading on its own fundamentals.” Supplies of crude oil increased 2 million barrels last week, according to the median of 10 estimates from analysts surveyed by Bloomberg News.
Prices will probably fall to $60 a barrel during the fourth quarter of the year, Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington, said on Bloomberg Television. “The second half of the year could be weak because inventories are high, demand is still relatively weak, there’s plenty of supply and lots of OPEC spare capacity.” Brent crude for April delivery rose 40 cents, or 0.5 percent, to $80.29 a barrel on the London based ICE Futures Europe exchange. Oil reached $80.92, the highest level since Jan. 11.
Reporter Mark Shenk can be contacted at mshenk1@bloomberg.net
Last week was exciting as we saw stocks and gold close above the February highs which confirms we are in a new up trend. The question everyone is wondering is:
How far will this market go before rolling over?
This is a tough question but we can get a good feeling about the risk and if it’s worth putting money to work or not at this point. Here are my quick points and thoughts about the stocks indexes at the current price (March 5th closing price).
• The market is extremely overbought on the hourly and daily charts. Buying here is just chasing prices around, and that is a net losing game. • Small Cap stocks have been on fire making a new higher for the year. This is very bullish but again buying here carries too much risk because after such a sharp price appreciation, we can see it all be given back just as quick. • Volume over the past three weeks has been below average and when I see higher prices on declining volume I expect prices to drop very quickly once the thrust upwards ends. .
Stock Market Indexes – 21 Trading Days
Here is a simple chart showing the past 21 trading sessions. It compares the Nasdaq, NYSE, Russell 2000, Dow Jones, SP500, and Amex indexes.
As you can see the Russell 2000 (small cap stocks) and Nasdaq (tech stocks) have been on fire the past couple weeks while the solid large cap stocks lag.
Are The Small Caps Stocks Telling Us Something?
Its means investors and traders are confident enough to buy higher risk companies. This is good for the overall market because small cap stocks tend to lead the market in both up and down trends. What has me concerned is the low volume rally, which I don’t like.
One thing to note is that small cap stocks tend to do well during times when the US Dollar is rising. This is because they are not multinational dealing with currency exchange. So this small cap stock rally has me wondering if the US Dollar is about to continue its up trend or if investors really are comfortable with buying riskier stocks?
GLD Gold ETF – Daily Chart Gold gained some ground last week but the majority of the money seemed to flow into small cap stocks. But take a look at this bullish chart.
This is a text book bull flag pattern complete with and ABC retrace, trend line break, and reversal candle off of a support zone. I am bullish on gold long term but think we could see prices rise a couple percent from here but will trend sideways/down for the next 2-3 weeks to digest the recent move up.
US Dollar Index – Weekly Chart I have posted this chart several times in the past few months with 83 being a key resistance level. The dollar’s recent price action is very bullish and it is flagging just under this key resistance level. I feel the price is heading lower from here but only time will tell. A breakout to the upside will put a lot of pressure stocks and precious metals.
Weekend Trading Conclusion: Last weeks strong rally into the close will most likely carry over into Monday and possibly Tuesday. The reason being is simply because retail traders and investors (John Doe’s) get excited when they see higher prices, thus it attracts more money into the market.
In short, I feel the market is overbought. All indexes are trading at resistance other than the Russell 2K index, and volume is below average. I am going to wait and see how things unfold this week before thinking about getting committed to any more long positions. If anything I will be looking to short the market using the intraday charts for a quick trade. Again low volume rallies that are overbought tend to snap back very quick on an intraday time frame providing a 1-4 hour trade.
Crude oil was higher overnight as it extends the rally off February's low. Stochastics and the RSI are overbought, diverging but are neutral to bullish signaling that sideways to higher prices are possible near term.
If May extends the rally off February's low, the 87% retracement level of the January-February decline crossing at 83.53 is the next upside target. Closes below the 20 day moving average crossing at 78.72 would confirm that a short term top has been posted.
First resistance is the overnight high crossing at 82.82 Second resistance is the 87% retracement level of the January February decline crossing at 83.53
First support is the 10 day moving average crossing at 80.33 Second support is the 20 day moving average crossing at 78.72
Natural gas was lower overnight and posted a new contract low as it extends this winter's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If May extends the decline off January's high, weekly support crossing at 4.157 is the next downside target. Closes above the 20 day moving average crossing at 5.046 would confirm that a short term low has been posted.
First resistance is the 10 day moving average crossing at 4.772 Second resistance is the 20 day moving average crossing at 5.046
First support is the overnight low crossing at 4.550 Second support is weekly support crossing at 4.157
The U.S. Dollar was slightly lower overnight as it extends last Friday's decline. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 79.92 would open the door for a larger degree decline during March.
If June renews this winter's rally, the 50% retracement level of the 2009 decline on the weekly continuation chart crossing at 81.97 is the next upside target.
First resistance is February's high crossing at 81.70 Second resistance is the 50% retracement level of the 2009 decline on the weekly continuation chart crossing at 81.97
First support is last Wednesday's low crossing at 80.14 Second support is the reaction low crossing at 79.92
Crude oil rose for a second day on speculation improving world demand and OPEC supply restrictions will help slow growth in stockpiles.
A report tomorrow in the U.S., the world’s largest oil consumer, will probably show consumer confidence is at its highest in a month, according to a Bloomberg News survey. Japan, Asia’s second largest oil importer, posted a current account surplus in January as exports climbed for a second month. Kuwait, the fourth largest Organization of Petroleum Exporting Countries producer, will maintain oil export limits through June, the Kuwait Times reported on March 6.
“Macro-economic sentiment seems to be fairly positive,” said Toby Hassall, research analyst with CWA Global Markets Pty in Sydney. “That’s helping to nudge oil up but the actual physical supply and demand data is still soft.”
Crude oil for April delivery rose as much as 54 cents, or 0.7 percent, to $82.04 a barrel in after hours electronic trading on the New York Mercantile Exchange. It was at $81.92 at 1:24 p.m. in Singapore.
The contract increased 1.6 percent to $81.50 on March 5, the highest closing price since Jan. 11, after a report showed U.S. employment declined less than forecast in February. It gained 2.3 percent last week as global equity markets rallied and U.S. refining climbed to a five month high.
Gains in the equity markets are supporting prices, Hassall said. The extent of oil’s rally after last week’s U.S. inventory report was surprising given that crude stockpiles are still rising and gasoline stocks remain high, he said.....Read the entire article.
Crude oil rallied after fewer than expected payroll contraction in the US. Investors anticipate improved economic outlook would boost energy demand. WTI crude oil price surged to a 7 week high of 72.07 before closing at 81.5, up +1.6% Friday. The benchmark contract also added +2.3% on weekly basis. Brent crude also rose +2.96% last week, narrowing the spread between WTI BRENT crude prices. We believe this was due to the unexpected stock build in Cushing Oklahoma, where the WTI crude is stored.
The US Energy Department reported on Wednesday that crude oil inventory increased +4.03 mmb, compared with market expectation of +1.9 mmb gain, to 341.6 mmb in the week ended February 26. Cushing stock, halting the downtrend, rose for the first time in 10 weeks. Although utilization rate increased +0.7%, it was more than offset by +2% rise in imports.
Gasoline inventory rose +0.77 mmb to 231.9 mmb despite decline in imports and flat production. Demand slid -2% to around 8.88M bpd. Distillate stockpile continued to draw but the magnitude was less than expected. Although demand rose +4.6% during the week, it remained +21% above 5 year average.
We regard this as a weak set of inventory data. However, the market ignored the huge increase in crude oil inventory but focused on strong ISM services data and other positive macroeconomic data. Moreover, investors might view increase in utilization rate and rise in implied petroleum consumption as signs of recovery in US oil market.
The weekly data is volatile in nature. Let's take a look at the 4 week average. Total product demand averaged at 19.3M bpd over the past 4 week, down -1.2% from the same period last year. Although the contraction has moderated, it's far from being described as encouraging. Similar situations are seen in fuel demands. 4 week average for motor gasoline and distillate were down -2.5% and -7.7% respectively from the same period last year.
In the coming week, the International Energy Agency, the US Energy Department and the OPEC will release their monthly oil reports. We expect to see modest upgrade in global oil demand given stronger macroeconomic outlook. Major growth driver remains in countries outside OECD. In previous reports, all 3 agencies viewed that OECD demand should remain subdue in 2010 and 2011. We will see if there're any upward revisions in these countries as OECD demand is crucial for sustaining oil price above 80.
It is almost been a year since the day the oil market was changed forever. After collapsing in a heap of deflationary despair, oil was saved by what could only be described as a historic government intervention. It was the day that the US Federal Reserve changed the world by printing more money and therefore, essentially putting a floor under the price of oil. It was the day that the Federal Reserve, after having nowhere to go on interest rates, made a move to save the banks and the economy by taking the unprecedented step to use quantitative easing in the United States to save our economy.
This move of course changed the way oil moved and was valued. And to this day this government intervention and newly created Fed policy inspired the largest move in crude oil prices there has ever been even when considering geo-political events or even data on supply and demand. As we come upon the one year anniversary let’s look back and see how the global oil market was changed and what that means for our future.
A year ago the economic world was stunned. We were 6 months away from the collapse of Lehman Brothers investment bank, a failure thought almost impossible. The world started to realize that this sub-prime crisis was a much larger problem than at first glance and wasn’t going to go away very easily. The Federal Reserve was aggressive and moved the target range for the federal funds rate at 0 to 1/4 percent and even took the step to buy some bad assets like mortgage backed securities from the banks. Yet despite these moves and some short term stabilization in the market place many markets still seemed frozen.
Oil, despite a three month spike in price, appeared to be getting ready for a collapse of its own. Tight credit and still plunging demand made price prospects dim. It was obvious that because of lack of confidence and real problems with toxic assets still festering in our nation’s banks, that even a zero percent fed funds rate would not be enough to ward of deflationary fears. Demand destruction was rampant. Oh yes, oil had recovered from its January lows but that was after we had experienced the biggest peak to valley price drop in the history of the oil market reflecting what was the biggest peak to valley drop in the history of oil demand. This drop in demand reflected the fact that the economy was still contracting and we were getting ready to see more de-leveraging and more deflation.....Read the entire article.
Crude oil surged and gasoline rose to a 17-month high after U.S. employment declined less than forecast in February, bolstering optimism that fuel demand will climb in the world’s biggest energy consuming country.
Oil rose as much as 2.3 percent after the Labor Department reported that payrolls dropped 36,000 last month. The total was forecast to fall by 68,000, according to economists surveyed by Bloomberg News. U.S. fuel use, averaged over the past four weeks, was 19.3 million barrels, up 3 percent from a year earlier, an Energy Department report on March 3 showed.
“The employment numbers were quite good relative to expectations, so I’m surprised the market isn’t responding more,” said Michael Fitzpatrick, vice president of energy at MF Global in New York.
Crude oil for April delivery rose $1.26, or 1.6 percent, to $81.47 a barrel at 12:09 p.m. on the New York Mercantile Exchange. Futures reached $82.07, the highest level since Jan. 12. The contract is up 2.3 percent this week.
Gasoline for April delivery increased 3.13 cents, or 1.4 percent, to $2.265 a gallon in New York. The fuel touched $2.2831, the highest price since Oct. 3, 2008.
The Standard & Poor’s 500 Index gained 10.83, or 1 percent, to 1,133.80. The Dow Jones Industrial Average rose 81.25 points to 10,525.39.
“We had a nice spike up on the jobless report,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Whenever we get above $80 the bids seem to dry up. I will have to see us close above $80 for a few more days before I’m convinced we’re going to test $84.96.”
The April oil contract surged to $84.96 a barrel on Jan. 11, the highest level since October 2008.....Read the entire article.
