Fed rumors of intervention support commodities

A Trillion Reasons to Buy Oil May Not Be Enough

A trillion dollars in printed money and oil still can’t close higher! Ok, well maybe it hasn’t happened yet but the rumors of another trillion in quantities easing from the Fed as well as a multitude of other factors sent gold soaring to an all time high and supported other commodities as well. What also seemed to help was this perception that with the reelection of Japan’s Prime Minister Naoto Kan's in the Democratic Party of Japan leadership, it could be less likely that Japan will intervene in the yen. WRONG!!! The yen seemed to taunt the prime minster hitting a 15-year high against the dollar and only then the Japanese finally said enough is enough and intervened in the yen for the first time in six years. Reuters News quoted Finance Minister Yoshihiko Noda as saying, "Japan intervened in the currency market as the impact of the yen's rise on the economy could not be ignored and that Japan would continue to take action, but that it had been acting alone.” Reuters said that estimates on how much yen selling Japan had done in Asia varied widely. Dealers cited talk of 300-¥500 billion ($3.6 billion-$6 billion) although some reports put it closer to ¥100 billion.

Of course prior to the intervention and while gold and silver were flying high, oil sagged on the fact that we are over supplied and the fact that Enbridge made progress on the pipeline leak in Romeoville. Now it is being reported that the pipeline will be restarted before the end of the week. Midwest refiners looked to Cushing, Oklahoma as an alternative for supply which will lead to a bigger draw at the delivery point for the NYMEX Crude. Bloomberg News reports that Enbridge has already submitted a restart plan and that the government doesn’t see any “systemic problems” with the pipeline.

So if oil can ignore the dollar and pay more attention to this pipeline then the macro world around us, then the focus for oil seems to be more on supply and suppliers of crude. The API upwardly revised last week’s crude draw and added another crude build on top of it. The API reported that crude supply increased by 3.33 million lifting their total stocks with the revision to 361.838 million barrels a 7.623 million barrel increase from their last week total. That now puts them above the Energy Information Agency total by 1.984 million barrels which might be what we see as a build from EIA. The API also reported distillates down 1.52 and gas down 963,000.

Supply war! Maybe? The Russians say nyet to OPEC. Could there be a market share fight brewing? Days after the Saudis reminded the world of how much spare capacity there is, they asked Russia to restrain production. The Russians seem to want to take away the Saudi top producer spot. The Saudis may respond with selling more oil to teach the Russians a lesson. Stay tuned to this drama as it may turn out to be a very bearish development.

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.

 

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