Oil bulls optimistic on data from China

“A creative man is motivated by the desire to achieve, not by the desire to beat others.”

Ayn Rand

EMI QuickView Short Term Market Overview

Impact on Energy Prices

Price Drivers

Crude

Gasoline

HO/Diesel

Nat Gas

Supply

Cbr

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CBr

Demand

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N

Inventories

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CBr

US Dollar

CBu

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CBu

CBu

Global Equities

CBu

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CBu

CBu

10 Yr Treasuries

N

N

N

N

Geopolitics

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Technicals

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Market Sentiment

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Overall View

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Bias

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

CBr - Cautiously Bearish

Tuesday’s trading saw oil prices trade in both positive and negative territory throughout the trading session as the financial markets also continued to flip-flop throughout the day. Equities started the day in the positive column while the US dollar was losing ground resulting in oil prices firming. However, by mid day the dollar had reversed and sent oil prices back on the defensive in what turned out to be a relatively lackluster trading session even though Gold closed at a new all time record high above $1,300/ounce. The financial markets are currently all about when the US Fed will intervene with a new round of quantitative easing (QE) and what will be the size of the QE. There are now two schools of thought...one expecting a full blown QE program like what occurred in the past and the other (based on a Fed official comment yesterday) expecting a scaled down version. In either case if the economy does not improve over the next few months the likelihood of the Fed intervening is very high. Barring a lot of earnings disappointments when third quarter earnings are released, the market is quickly viewing the Fed’s intention as sort of a put for the equity markets. As such the market sentiment is gaining strength in anticipation of equities continuing to firm which would result in oil prices remaining firm irrespective of the fact that the current fundamentals are still bearish.

Over the last twenty four hours the global equity markets were mixed, but as shown in the EMI Global Equity Index table below the Index has moved into positive territory for the first time since mid-April. The Index is higher by 0.3% for the year to date with Germany still holding the top spot on the leader board. Six of the ten bourses are in the winner column while only China’s Shanghai A shares are still hovering in bear market territory for the year. Most Asian markets gained ground overnight while Europe is starting the day on the defensive. However, the main storyline in the financials is the falling US Dollar. The dollar is currently below the last major support level and losing ground on a negative view of the US economic recovery coming from trader/investors as they focus on last week’s Fed statements.

EMI Global Equity Index

9/29/10

Change

Change

2010 YTD

2010

From

From

Change

6:15 AM

Yesterday

Yesterday %

%

US/Dow Jones

10,858

46

0.43%

4.1%

Can/S&P-TSX

12,279

88

0.72%

4.5%

Lon/FTSE

5,555

(24)

-0.43%

2.6%

Paris/Cac 40

3,744

(19)

-0.50%

-4.9%

Germany/Dax

6,240

(35)

-0.56%

4.7%

Japan/Nikkei

9,559

64

0.67%

-9.4%

HongKong/HangSeng

22,379

269

1.22%

2.3%

Aussie/SYDI

4,645

(25)

-0.54%

-4.9%

China/Shanghai A

2,735

(1)

-0.04%

-20.4%

Brazil/Bvspa

69,228

412

0.60%

0.9%

EMI Global Equity Index

14,722

78

0.53%

0.3%

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