Energy report: Real value unmasked

Oil Fundamentally Speaking.

Don’t you hate it when the fundamentals get in the way of a great bullish trade? Yes, you do unless you are bearish. Oil traders and the world continue to get a reality check as global markets are crumbling and teetering on the edge of oblivion. There is great loss of confidence in Europe as the true nature of the ills that still plague the global economy are unmasked. We live in a world of printed money, piles of debt and countries that hide the true nature of their debt. The fundamentals of supply and diminishing demand has taken over crude oil as opposed to the fundamentals of economic illusions along with global markets that are crashing down.

Oil got crushed into expiration, dropping to a low into the $64 a barrel handle before coming back on rumors of euro currency intervention. Yet the Wall Street Journal says that, “the sharp rally in the euro against the Swiss franc in Asian trading Friday was most likely due to large-scale covering of short positions and profit-taking rather than intervention from the Swiss or other central banks.” Yet many floor traders in Chicago disagreed. The markets are worried that trying to save the euro might be a case of too little too late. Many worry about “financial reform” in the United States and there is a very important vote coming up in Germany and how they will come up with their share of the $1 trillion euro-region bailout.

With oil prices hitting the lowest level since July of 2009 the oil bulls have got to be asking themselves why in heavens names were they so bullish in the first place. With global oil inventories well above normal and a global economy that is really an illusion, it was only a matter of time before this market came back down to earth. Expiration hit when supply in the Nymex delivery point stood at a record 38.96 million barrels which some say is close to the it’s operating capacity. Now with Europe faltering, oil demand expectations have begun to fall across the globe.

In recent months oil has been able to ignore the fact that we have a glut of global oil supply. Oil bulls were being fed tons of feel good stimulus drugs that made them happy and optimistic and oblivious to the real dangers that surrounded them. They bought into this kind of money induced LA-LA Land and this utopian world where China would continue to buy all the oil and ship their goods to Europe and the United States and all of the world would go along its merry way.

Now the drugs have worn off and we either need more drugs or we are going to go through some major withdrawals. Germany is passing a bill to feed cash into the system that may buy us some time, yet there will come a day when things will have to crash down. And we may buy a little time with more global central bank maneuvers but the way Europe has handled this crisis it is clear that governments could make things worse. That is why the trade fears financial reform because what lacks in government today is the ability to admit their own major culpability in the great financial meltdown. You will never have reform that means anything if the government cannot reform itself.

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

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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