Ding, dong the well is dead, finally!
The BP Macondo well has been officially declared dead over the weekend. The Financial Times says that U.S. authorities pronounced BP’s blown-out Macondo well in the Gulf of Mexico “effectively dead” on Sunday, 152 days after the explosion on the Deepwater Horizon drilling rig that caused the world’s largest accident offshore. The announcement ends the barrel leak, which sparked fury among the U.S. public and politicians, but may eventually be seen to have had only a marginal effect on the global oil industry. Marginal? BP opponents of drilling will use it as a rallying point. Yet at the same time the industry has learned a lot and will be better prepared to respond to this type of disaster in the future. So there will be some good that will come from this disaster.
Oil is rallying a bit on a weak dollar. Of course the main factor for oil and most other markets will be the impact from this week’s FOMC meeting. If I have said it once I think I have said it a thousand times that the Fed is one of the major driver of oil prices as well as other commodities. In fact the Fed should get a lot more credit for stable oil prices than the boys in the OPEC cartel. If the Fed surprises us and makes an announcement on another round of quantitative easing then oil could rally sharply. More than likely that won’t happen but they may lay the ground work for another round of easing at the next meeting. The amount that is being talked about is $1 trillion.
Dow Jones says that the euro has rebounded Monday but any gains are expected to be limited ahead of the Federal Reserve's next open policy committee meeting on Tuesday. Although the FOMC is expected to leave interest rates unchanged and signal that they will remain that way for an "extended period," there is still the risk the central bank will expand its quantitative-easing scheme to help secure a recovery in the U.S. economy. The euro ended last week on the slide, hit by a rise in the cost of insuring Irish sovereign debt to a new record high and fears that other fiscally weaker debtors in the euro zone are in even worse trouble. Ireland is generally seen as one of the debtors least at risk of default. But concerns about the European debt crisis subsided over the weekend after recent research on the extent of Ireland's debt problems was revealed to be incorrect.
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
