Oil inventories increase significantly

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EMI QuickView Short Term Market Overview

Impact on Energy Prices

Price Drivers

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Global Equities

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Geopolitics

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Technicals

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N - Neutral Bu - Bullish Br- Bearish CBu - Cautiously Bullish

CBr - Cautiously Bearish

The two biggest events that are likely to impact prices in the short term are the news that that Enbridge has been given permission to restart line 6A by the end of the week and the fact that the API reported a surprisingly huge build in crude oil inventories versus most market expectations for a modest decline. Both events occurred after the market closed on Tuesday and the reaction as of this morning has been somewhat aggressive selling as WTI is currently down over $1/bbl. In addition, the Japanese government began an orchestrated currency intervention program to attempt to drive the value of the Yen lower and thus make exports more economically competitive. The Japanese government has been buying US dollars overnight resulting in the dollar firming thus putting additional pressure on crude oil prices. In fact the entire global currency market is in a bit of turmoil on the Japanese news as well as China allowing its currency to rise to the highest levels versus the US dollar since 1993 on concerns over an evolving inflation risk in China as well as pressure coming from the US government for China to allow their currency to be more market related. Hearings over China’s currency begin in the US Congress today which follows high level visits by the White House economic team to China last week. So far this morning, most of the standard oil market price drivers are all a negative influence on oil prices.

Equity markets have stabilized after gains earlier in the week as shown in the EMI Global Equity Index table below. Overnight most Asian bourses (except China) gained ground on the news of the Japanese government currency intervention. However, China’s Shanghai A shares drifted lower on concerns that the government could intervene to further attempt to slow the main economic growth engine of the world as inflation is running above the government’s threshold of 3% (current inflation level at 3.5%). Furthermore, a rising Yuan versus the US dollar will make exports out of China less competitive and thus potentially reduce China’s voracious appetite for oil and other commodities. Equities in Europe are drifting lower on a surprise increase in jobless claims in the UK coupled with concerns over the current realignment starting to take place in the global currency markets.

EMI Global Equity Index

9/15/10

Change

Change

2010 YTD

2010

From

From

Change

7:11 AM

Yesterday

Yesterday %

%

US/Dow Jones

10,526

(18)

-0.17%

0.9%

Can/S&P-TSX

12,193

43

0.35%

3.8%

Lon/FTSE

5,557

(10)

-0.18%

2.7%

Paris/Cac 40

3,763

(12)

-0.32%

-4.4%

Germany/Dax

6,263

(14)

-0.22%

5.1%

Japan/Nikkei

9,517

217

2.33%

-9.8%

HongKong/HangSeng

21,726

30

0.14%

-0.7%

Aussie/SYDI

4,662

35

0.76%

-4.5%

China/Shanghai A

2,779

(38)

-1.35%

-19.2%

Brazil/Bvspa

67,692

(339)

-0.50%

-1.3%

EMI Global Equity Index

14,468

(11)

-0.07%

-1.5%

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