Oil moved with the market's massive mood swing as it tried to determine just where we are in the economic recovery. A weak stock market and a flight to quality helped shore up the dollar and in turn took its toll on commodities. Across the board we saw metals, grains and petroleum give way as concerns are mounting that perhaps we have priced in too much good news too soon. Even the surprising jump in the Empire State Manufacturing number seemed to be ignored by a marketplace that seemed fixated on running for cover. The index rose to 12.1 from -0.6 in July the first positive reading since April 2008, and the highest since November 2007.
Manufacturing expansion could be a sign that demand destruction for energy may be bottoming out but with option expiration and a sinking feeling in the stock-market, it was not enough to save the market.
Yet late in the day some positive housing numbers gave the market a boost. The National Association of Home Builders/ Wells Fargo Market Index had a reading of 18 which was its highest since June 2008. First time home buyers credits seem to be a major factor in turning home builders feeling around and that piece of good news helped the market out a bit at the end.
And we seem to have dodged the hurricane bullet. Ana and Claudette have left the National Hurricane Center storm map and Bill looks to be heading away from key oil areas.
A potential bearish development for oil if the market believes it is an AFP story that says that “A top Iranian nuclear official said Iran was ready to hold talks with the West on its controversial atomic drive, "without preconditions" quoting Iranian state television. "Negotiations without preconditions is Iran's main stance on the nuclear issue," Iran's envoy to the International Atomic Energy Agency, Ali Asghar Soltanieh, was quoted as saying. Stay tuned!
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com.
