Moody and Blue and the many shifting moods of the global oil market.
Talk about moody, I am starting to believe the oil market is manic. Can a broker prescribe meds for a market? This market is messed up and is having deep seated feelings of anxiety. The oil market is starting to hear voices and it does not know which one to listen to. Should it listen to the American Petroleum Institute that is telling it that crude supplies soared by over 6.0 million barrels last week? Or should it listen to the Department of Energy that is saying that crude oil inventories increased only by 1.7 million barrels? Or should it take note when the API reported gasoline supply rose over 2.0 million barrels or the DOE that said it only increased by 600,000 barrels. No matter. This market is a mess.
The bottom line is the Department of Energy report was bullish because it wasn’t as bearish as the API. No wonder this market is a mess.
Of course supplies are secondary to the energy market. It's fixated on issues other than supply. There's always the stock market to be worried about. And who can forget the U.S. dollar. Before the DOE report oil firmed on reports of falling wholesale inventories and talks that Pulte homes is buying Centrex builders. A housing deal, no matter why it is happening, gave some people hope that maybe, just maybe, this deal will signal a bottom in the housing market. Yet in light holiday type volume it does not take that much to be optimistic or pessimistic for that matter. When the Fed minutes came out with words like job losses, declining equity and housing wealth, the optimism seemed to turn and oil turned down with it. Yet that was yesterday - and yesterday's gone. Today is a new day and hope springs eternal.
Oil rejection of the breakdown of the lower trend channel and today’s reversal could turn out to be wildly bullish if we can hold onto the early gains. Forget that oil supply is 15.2% above a year ago. Forget the fact demand is lousy. The DOE says that demand is lousy. Forget that the DOE said that total products supplied over the last four-week period was only 18.9 million barrels per day, down by 4.4% compared to the similar period last year. Or that motor gasoline demand was down by 0.2% from the same period last year. Don’t even worry that distillate fuel demand was down by 7.2% from last year. Just worry about the stock market and your charts.
Yet with light holiday volume, moods can shift quite quickly. Day traders love the action. The rejection of the breakdown of the lower channel and rebound keeps the bulls in control of this market. Position traders need to buy breaks.
Phil Flynn is vice president of Alaron Trading and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com .
