The Exit Strategy Mirage.
We got to get out of this place, if it’s the last thing we ever do.
It looked like we were getting so close to the exit just when you think you should be getting there suddenly it is further away. Or it disappears completely leading one to wonder whether it was ever there at all. It is the Fed day mirage with no exit strategy in sight that will leave energy traders on pins and needles. Oh sure we will get the latest data from the Department of Energy on supply and demand, but let’s face it, it may be all secondary if we get any surprises from the Fed.
Ben Bernanke of course has been under fire, so politically it may be the equivalent of giving his pink slip if he encourages some rash action. At the same time, the politicians at that point might rise up and either abolish or take over the Fed so the likelihood of anything crazy would be downright crazy. That does not mean that can’t affect the oil as the market’s reaction or non-reaction to the meeting will put the focus back on inventories.
What could be interesting after the Fed, are the exchange rates between various currencies and the dollar. With the Chinese government reining in the banks and problems with the PIGS (Portugal, Ireland, Greece and Spain) which all seem to be in deep economic trouble in the eurozone. Sure the growing concerns about tightening in China makes the always exciting Fed meeting a little bit more exciting and all the side stories with the Bernanke confirmation and Geithner perhaps withholding information on the AIG bailout adds to the fun.
Yet before we get to that we get weekly energy inventories. If last night’s American Petroleum Institute report is any indication, we might find out that our oil supply is lost in the fog. The API reported that U.S. crude stocks fell by 2.2 million barrels. The API showed that Distillate stocks fell 2 million barrels and gas up 91600 barrels. Imports were down by 1.5 million barrels a day so do not get all excited thinking that perhaps this was a demand driven drawdown. No, it is about fog and next week it may be about the oil spill so the numbers are not going to tell us as much as we would like. They will be a bit messy until we can get all the mess cleaned up.
We have been telling you that we are bearish on oil. Long term we are looking for a move down into the forties.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.
